As you set out to buy a home, saving for a down payment is likely top of mind. But you may still have questions about the process, including how much to save and where to start.
If that sounds like you, your down payment could be more in reach than you originally thought. Here’s why.
The 20% Down Payment Myth
If you believe you have to put 20% down on a home, you may have based your goal on a common misconception. Freddie Mac explains:
“. . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.”
Unless it’s specified by your loan type or lender, it’s typically not required to put 20% down. According to the latest Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. There are even loan types, like FHA loans, with down payments as low as 3.5%, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.
This is good news for you because it means you could be closer to your home buying dream than you realize. For more information, turn to a trusted lender. We have several lenders we highly recommend. Call us to find out who we recommend for your situation.
Keep in mind that if you put less than 20% down, you will pay Private Mortgage Insurance) which can run $150 - $250 per month, but it may be a way for you to get into a home. Many lenders will let you apply to have the PMI removed after you’ve had the loan for 2 years or more (as long as your loan is 80% or less than the value of your home). Or, you may decide to refinance and if the Loan to Value ratio is under 80% you will not need to pay PMI on your new loan.
Down Payment Assistance Programs Can Be a Game Changer
The Summit Combined Housing Authority (SCHA) provides Loan Down Payment Assistance. You can view the guidelines for this program here.
The SCHA also has a program called Housing Helps. If you want to purchase a home for your primary home and you are employed in the County 30 hours or more, this may be a way to come up with a large down payment. Additionally, if you are an investor and would like to purchase properties to rent long-term to people who work in the County 30 hours or more, then this might be just the plan for you. You can check out this program here.
You don’t need a 20% down payment to purchase a home. And, in Summit County, there are resources to help you with your down payment. Call Nelson Walley Real Estate and let our Buyers’ Agents assist you with finding financing that will work for you.