Aspiring to become a homeowner is an exciting journey, but one of the biggest barriers for many is coming up with the down payment. According to a recent survey by Clever.com, 77% of future homebuyers have already started saving for their down payment, showing a strong determination to achieve their goal.
While many people aim to put down 20% on a home to avoid additional costs like mortgage insurance and reduce monthly payments, experts like Danielle Hale, chief economist at Realtor.com, emphasize that 20% is not a requirement. In fact, the average down payment in the first quarter of 2021 was 13.6%, up from the previous year.
It’s important to note that the typical down payment for first-time homebuyers is 8%, compared to 19% for repeat buyers, according to the National Association of Realtors. This shows that the 20% rule is not a strict guideline that every buyer must follow.
At Extreme Investor Network, we understand the challenges that homebuyers face in accumulating a higher down payment, especially in a market with rising home prices. Close to 40% of Americans cite a lack of savings for a down payment as a major hurdle to homeownership, according to a CNBC Your Money Survey.
But the good news is, you don’t need 20% to purchase a home. In fact, the national average for a down payment is closer to 10% or 15%, depending on the state. With various loan programs available, such as VA loans, USDA loans, and FHA loans, buyers have more options to make their homeownership dreams a reality with lower down payment requirements.
While a smaller down payment can help in addressing affordability challenges, it’s essential to consider the extra costs that come with it. Borrowing more from your lender means higher monthly mortgage payments and the potential need for private mortgage insurance (PMI). PMI can cost anywhere from 0.5% to 1.5% of the loan amount annually, adding significant costs to your monthly expenses.
At Extreme Investor Network, we provide valuable insights and resources to help you navigate the complex world of personal finance, making informed decisions that align with your financial goals. Our expert advice and unique perspective set us apart as a trusted source for all things related to personal finance and investment strategies.