Is the idea of saving for a down payment holding you back from buying a Boston condo for sale right now? You may be eager to take advantage of today’s low mortgage rates, but the thought of needing a large down payment might make you want to pump the brakes. Today, there’s still a common myth that you have to come up with 20% of the total sale price for your down payment. This means people who could buy a Boston downtown condo may be putting their plans on hold because they don’t have that much saved yet. The reality is, whether you’re looking for your first condominium or you’ve purchased one before, you most likely don’t need to put 20% down. Here’s why.
According to Freddie Mac:
“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”
If saving that much money sounds daunting, potential Boston real estate buyers might give up on the dream of homeownership before they even begin – but they don’t have to.
Data in the 2020 Profile of Home Buyers and Sellers from the National Association of Realtors (NAR) indicates that the median down payment actually hasn’t been over 20% since 2005, and even then, that was for repeat buyers, not first-time homebuyers. As the image below shows, today’s median down payment is clearly less than 20%.
As we can see, the median down payment was lowest for first-time buyers with the 2020 percentage coming in at 7%. If you’re a first-time buyer and putting down 7% still seems high, understand that there are programs that allow qualified buyers to purchase a home with a down payment as low as 3.5%. There are even options like VA loans and USDA loans with no down payment requirements for qualified applicants.
It’s important for potential homebuyers (whether they’re repeat or first-time buyers) to know they likely don’t need to put down 20% of the purchase price, but they do need to do their homework to understand the options available. Be sure to work with trusted professionals from the start to learn what you may qualify for in the homebuying process.
Don’t let down payment myths keep you from hitting your homeownership goals. If you’re hoping to buy a home this year, let’s connect to review your options.
The national average for down payments is 11%. But that figure includes first time buyers that put down as little as 3% down.. Let’s take a closer look.
While the broad down payment average is 11%, first time homebuyers usually only put down 3 to 5% on a home. That’s because several first-time home buyer programs don’t require big down payments. A longtime favorite, the FHA loan, requires 3.5% down. What’s more, some programs allow down payment contributions from family members in the form of a gift.
Some programs require even less. VA loans and USDA loans can be made with zero down. However, these programs are more restrictive. VA loans are only made to former or current military service members. USDA loans are only available to low to-middle income buyers in USDA-eligible rural areas.
For many years, conventional loans required a 20% down payment. These types of loans were typically taken out by repeat buyers who could use equity from their existing home as a source of down payment funds. However, some newer conventional loan programs are available with 3% down if the borrower carries private mortgage insurance (PMI).
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