4 Common Down Payment Program Myths Debunked
Many studies about saving for a down payment automatically factor in 20 percent down as the standard. But, most first-time homebuyers don’t put down anywhere near that amount. In fact, the median down payment for buyers younger than 37 was just 7 percent, plus many loans and homebuyer programs offer much lower down payment requirements.
It’s time to recalculate how long you actually need to save. Veritas Urbis Economics did just that. Assuming a middle-class salary and the purchase of a median priced home (that’s currently around $252,000), they found you may have the down payment in less than two years. That’s assuming you’re putting away at least 10 percent of your income.
It’s true that 20 percent was the recommendation for years, primarily because you can get the best rates and avoid paying private mortgage insurance. But, for first-time homebuyers who don’t have the equity in a current home to provide that large down payment sum, saving for 20 percent could keep you sidelined for years.
Money Magazine points out that buyers can access one of the many down payment programs, including grants and interest-free loans, to help bridge the gap for new buyers and cover some or all of the down payment and closing costs.
With home prices on the rise in most areas, demand is rising for down payment assistance, according to Rob Chrane, CEO of Down Payment Resource.
Find out what down payment programs are in your market.
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