How much of a downpayment do you need to buy a home? Less than you might think! Many people believe that in order to purchase a home, you need a 20% downpayment. Studies show it’s one of the most enduring home buying myths.
In reality, the median downpayment among all home buyers is only about 10%. For first-time home buyers (comprising more than one-third of all home buyers), the downpayment is significantly lower, in the 3.5% to 5% range. There are even some no downpayment loan options, such as the VA home loan program.
That’s why if you’re thinking of purchasing a home, it’s a good idea to visit a reputable lender who can look at your financial situation, including how much you’ve saved, your debt level, credit score and other information to determine which home financing programs you may qualify for. You may just be surprised!
Here are some more interesting facts about home buying and financing across the country from the National Association of Realtors:
- About 87% of all home buyers finance their home purchases.
- For 58% of home buyers, the main or only source of their downpayment is their personal savings. About 38% of home buyers use all or part of the proceeds from the sale of another home, contributing to a larger downpayment for people buying a second or third home compared with those purchasing a home for the first time.
- For 13% of home buyers, the most difficult step in the buying process is saving for a downpayment. Of those buyers, nearly half say that student loans made saving for a downpayment more challenging. About 42% cite credit card debt as being their primary challenge; 37% cited car loans.
- Of all home buyers surveyed, 62% are married couples, 18% are single females, 9% are single males, and 9% are unmarried couples. The highest percentage of single female buyers was in the 66 to 74 age group at 22%. The highest share of unmarried couples were in the 22 to 30 age group at 20%.
- Buyers typically searched for eight weeks and looked at nine to 10 homes, five of which were viewed online only.
- For those trying to save for a downpayment, 23% said they reduced or eliminated spending on non-essential or luxury items; 15% spent less on entertainment, 12% purchased less clothing and 17% decided to forgo a vacation or multiple vacations. Other steps taken to help save for a downpayment: Taking on an additional job or gig, temporarily moving in with friends/family and putting off purchasing a new vehicle.
