- Lower down payments make homeownership more affordable.
- Federal programs keep many borrowers’ down payment low.
- Many homeowners put down 3 percent or less.
A home is often the largest single purchase people make, and buying your first home is a lifetime event. For decades, people saved for years for the 20 percent down payment they were told they needed to buy that first home. Today, however, most down payments are just half of that: 10 percent of the purchase price, or less.
High housing prices make a large down payment challenging. Even with two incomes, saving $50,000 for a down payment on even a modest $250,000 home can be a struggle. Add in the cost of renting while you save — plus paying off student loans and all the other expenses young families face — and the 20 percent down payment requirement locks many people out of the housing market today.
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Why Today’s Average Down Payment for a House Is Lower
Homebuyers don’t want to be “house poor.” To put down a large down payment, you’ll likely have to exhaust your savings. Doing that leaves you at risk if you have a financial emergency. Even the Consumer Financial Protection Bureau cautions first-time homebuyers not to spend every dime on a down payment.
For these reasons, the average down payment for a house is now about half what it was a generation ago. The median down payment in 2017 was 10 percent of the purchase price, according to the National Association of Realtors. The median purchase price was $235,000, so the average buyer was putting $23,500 down.
Buying a Home Without a Large Down Payment
Several federal programs can help people buy homes without having large down payments. First-time homebuyers who purchase a home using an FHA loan, for example, often put down only 3.5 percent. If you’re a veteran, you might be able to get a VA home loan with no down at all, although you could end up paying closing costs.
FHA Loan Requirements in 2018: How to Qualify for an FHA Loan
If you can put 20 percent down on your home, you’ll have the advantage of not having to pay private mortgage insurance. But if you can’t, you can pay PMI until you build up the equity in your home to reach the 20 percent level, and then cancel it.
With housing prices what they are now, and the financial demands on today’s young families, a lower down payment can make homeownership possible for many families.
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