One of the biggest misconceptions for first time home buyers is how much you will need to save for a down payment. Contrary to popular belief, you don’t always have to deduct 20% to buy a house. This is how it breaks down.
Recent survey by Point2People mentions that 74% of millennials (ages 25 to 40) say they are interested in buying a home over the next 12 months. The study notes, “88% say they have much less savings than the average national down payment, which is $ 62,600. “
Fortunately, $ 62,600 is not the amount each buyer needs for a down payment in the United States. There are many different options available, especially for first-time buyers (millennial or not). That amount can also be significantly less, depending on the purchase price of the house.
According to the National Association of Real Estate Agents (NAR), “The average subsistence home price for all housing types in August was $ 310,600.” (These are the newest numbers available). NAR as well indicates that:
“In 2019, the average down payment was 12 percent for all buyers, six percent for first-time buyers, and 16 percent for repeat buyers. “(See graph below):
This means that if a qualified first-time buyer buys a home at today’s average price, $ 310,600, with 6% down payment, in fact, the down payment only amounts to $ 18,636. That’s nowhere near $ 62,600.
Knowing that there are also programs like FHA where the down payment can be only 3.5% from the purchase price for a first-time buyer, that down payment could be much less – even just $ 10,871 for the same home noted above. There are also other programs such as USDA and loans for Veterans who waive prepayment requirements.
La Point2People a study also shares how many millennia have indicated they have saved for a down payment. As we can see in the chart below, 39% have already saved enough for a down payment on an average price home. Another 47% are close to that target, depending on the purchase price of the home.Unfortunately, the lack of knowledge about the home buying process keeps many motivated first-time buyers aside. That’s why it’s important to contact a local real estate professional to understand the requirements in your local area if you want to buy a home. A reliable agent and your lender can guide you through the process.
Be careful not to let big myths about buying homes keep you and your family out of the apartment. Let’s connect to discuss your options today.
Content previously posted in Keep Current Things