20% Down Payment, Is It Really Necessary To Purchase a Home?

Dated: September 27 2021

Views: 359

Is a 20% Down Payment Really Necessary To Purchase a Home? | MyKCM

There’s a common misconception that, as a homebuyer, you need to come up with 20% of the total sale price for your down payment. In fact, a recent survey by Lending Tree asks what is keeping consumers from purchasing a home. For over half of those surveyed, the ability to afford a down payment is the biggest hurdle.

That may be because those individuals assume a 20% down payment is necessary. While putting more money down if you’re able can benefit buyers, putting 20% down is not mandatory. As Freddie Mac puts it:

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 overwhelming, you might be ready to give up on the dream of homeownership before you even begin – but you don’t have to. According to the Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. It may sound surprising, but today’s average down payment is only 12%. That number is even lower for first-time homebuyers, whose average down payment is only 7%.

Based on the Home Buyers and Sellers Generational Trends Report from NAR, the graph below shows an even closer look at the down payment percentage various age groups pay:

Is a 20% Down Payment Really Necessary To Purchase a Home? | MyKCM

As the graph shows, the only groups who put 20% or more down on average are older homebuyers who likely can use the sale of an existing home to fuel a larger down payment on their next home.

What does this mean for you?

If you’re a prospective homebuyer, it’s important to know you don’t have to put the full 20% down. And while saving for any down payment amount may feel like a challenge, keep in mind there are programs for qualified buyers that allow them to purchase a home with a down payment as low as 3.5%. There are also options like VA loans and USDA loans with no down payment requirements for qualified applicants.

To understand your options, you do need to do your homework. If you’re interested in learning more about down payment assistance programs, information is available through sites like downpaymentresource.com. Be sure to also work with a real estate advisor from the start to learn what you may qualify for in the homebuying process.

Bottom Line

Don’t let the myth of the 20% down payment halt your homebuying process before it begins. If you want to purchase a home this year, let’s connect to start the conversation and explore your options.

Blog author image

Carmen Johnson

Co Owner of the Red Door Team Carmen has been born and raised in Snohomish. Is married, owns a home in downtown, has a Goldendoodle and is expecting her first child in April! Loves spending time with....

Latest Blog Posts

The Reason Why in This Market, Sellers Are Still Firmly in the Driver’s Seat

As we near the end of the year, more homeowners are realizing the benefits of today’s sellers’ market. Record-breaking home price appreciation, growing equity, low 

Read More

A Winter Like Never Before? Why We May See Home Sales Surge This Season.

Like most industries, residential real estate has a seasonality to it. For example, toy stores sell more toys in October, November, and December than they do in any other three-month span throughout

Read More

Multiple Strong Offers A High Probability For Sellers This Season

Are you thinking about selling your house right now, but you’re not sure you’ll have the time to do so as the holidays draw near? If so, consider this: even as the holiday

Read More

NWMLS Market Report October 2021

✨The latest market update from NWMLS is out and has discussed that " brokers are detecting indecisiveness by some buyers who are getting mixed "work from home" messages from their employers. The

Read More