Blog posted On July 27, 2017
For most first-time home buyers, the biggest challenge when buying a home is saving for the down payment. However, the 20% down payment is not as rigid of a requirement as it has been in the past. Low down payment programs, especially those targeting first-time home buyers, are growing in popularity.
The National Association of Realtors (NAR) reports that over 70% of noncash, first-time home buyers did not put down 20% and over 54% of total buyers put down less than 20% in the past five years. Typically, 60% of all first-time home buyers put down approximately 6% or less.
Many potential first-time home buyers are not aware of low down payment programs, and continue to save for the traditional 20% down payment. Government-sponsored loans like FHA loans have lower down payment requirements, and VA loans do not require a down payment at all. Additionally, not all conventional financing requires a 20% down payment.
20% down payments do have some advantages including lower monthly mortgage payments and no mortgage insurance. Buyers who put down 20% or more may also qualify for a better mortgage interest rate. The 20% down payment is the best option for some borrowers but not all. Home buyers should consult a mortgage professional to determine what type of financing and down payment amount