Do I Really Need a 20% Down Payment to Buy a Home?

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Is the idea of saving for a down payment holding you back from buying a home right now? You may be eager to take advantage of today’s low mortgage rates, but the thought of needing a large down payment might make you want to pump the brakes. Today, there’s still a common myth that you have to come up with 20% of the total sale price for your down payment. This means people who could buy a home may be putting their plans on hold because they don’t have that much saved yet. The reality is, whether you’re looking for your first home or you’ve purchased one before, you most likely don’t need to put 20% down. Here’s why.

According to Freddie Mac:

“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”

If saving that much money sounds daunting, potential homebuyers might give up on the dream of homeownership before they even begin – but they don’t have to.

Data in the 2020 Profile of Home Buyers and Sellers from the National Association of Realtors (NAR) indicates that the median down payment actually hasn’t been over 20% since 2005, and even then, that was for repeat buyers, not first-time homebuyers. As the image below shows, today’s median down payment is clearly less than 20%.

median down payment

Today’s median down payment is clearly less than 20%.

What does this mean for potential homebuyers?

As we can see, the median down payment was lowest for first-time buyers with the 2020 percentage coming in at 7%. If you’re a first-time buyer and putting down 7% still seems high, understand that there are programs that allow qualified buyers to purchase a home with a down payment as low as 3.5%. There are even options like VA loans and USDA loans with no down payment requirements for qualified applicants.

It’s important for potential homebuyers (whether they’re repeat or first-time buyers) to know they likely don’t need to put down 20% of the purchase price, but they do need to do their homework to understand the options available. Be sure to work with trusted professionals from the start to learn what you may qualify for in the homebuying process.

Don’t let down payment myths keep you from hitting your homeownership goals. If you’re hoping to buy a home this year, let’s connect to review your options.

Do I Really Need a 20% Down Payment

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Diane Casey Luong

Diane Casey Luong

Realtor

Realtor at RE/MAX Advantage I, Buying Real Estate Agent, Seller Real Estate Agent, Listing Real Estate Agent

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You may be wondering if now is a good time to buy a home…or if interest rates are projected to rise or fall. The free eGuide above will answer many of your questions and likely bring up a few things you didn’t even know you should consider when buying a home.

It’s difficult to know when is the best time to sell, or how to get the most money for your house, but you don’t need to go through the process alone.

You may be wondering if prices are projected to rise or fall…or how much competition you may be facing in your market. The free eGuide below will answer many of your questions and likely bring up a few things you haven’t even thought about yet.

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2015

RE/MAX 100% Club
Diane achieved levels of productivity in 2015 that were more than double the industry average with commission levels of $100,000 – $249,999

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2016

RE/MAX 100% Club
Diane achieved levels of productivity in 2016 that were more than double the industry average with commission levels of $100,000 – $249,999

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2017

RE/MAX 100% Club
Diane achieved levels of productivity in 2017 that were more than double the industry average with commission levels of $100,000 – $249,999

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2018

RE/MAX 100% Club
Diane achieved levels of productivity in 2018 that were more than double the industry average with commission levels of $100,000 – $249,999

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2019

RE/MAX 100% Club
Diane achieved levels of productivity in 2019 that were more than double the industry average with commission levels of $100,000 – $249,999

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2016

Realtor™ Association of Central Massachusetts
2019 Top Producers, Ruby Level

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2019

Realtor™ Association of Central Massachusetts
2019 Top Producers, Ruby Level

Working with Diane was an absolute pleasure and joy.

She was incredibly professional yet still warm and personable. I always felt that Diane had my best interests in mind; she never pressured me into anything and always worked to get me all the information I needed before making a decision.

Diane had great knowledge of the housing market in the area and the pros and cons to look for when looking at homes.

During the finalization process, Diane was able to refer me to an excellent home inspector and other individuals necessary for the closing.

I wholeheartedly recommend Diane and would use her again if I am lucky enough to buy another home or sell my own.

Bought a Townhouse home with Diane in 2016 in Worcester, MA.