Do You Have Enough Money Saved for a Down Payment?

“It is a common call I am receiving right now, from potential buyers, lamenting the fact that they are living in a small apartment, working from home, with no outdoor space. Often there is more than one person sharing this space making the living conditions even harder.
I ask my clients all the time, “are your living conditions still serving your current needs?” Who would have anticipated that we would all need home office space? Who would have anticipated that we would need that space for more than one person? Who would have anticipated that we would be home schooling our children? Which brings me back to my original question; “is it time to make a move?”
This article from “Keeping Current Matters” helps home buyers understand the financial obligation needed to buy a home. Especially first time home buyers; there are so many loan programs to help you achieve your goal of home ownership. Many of you have great long term money in the way of income but do not have a lot of upfront money in the way of down payment and closing cost.
The first step is to find a mortgage lender that can guide you through the process. Your Realtor can recommend good, tried and tested lenders to advise you.
Mary Beth Harrison
Dallas Native Team | Dave Perry-Miller Real Estate
Modern married multi-ethnic young couple calculating financial bills at home

One of the biggest misconceptions for first-time homebuyers is how much you’ll need to save for a down payment. Contrary to popular belief, you don’t always have to put 20% down to buy a house. Here’s how it breaks down.

A recent survey by Point2Homes mentions that 74% of millennials (ages 25-40) say they’re interested in purchasing a home over the next 12 months. The study notes, “88% say they have significantly less savings than the average national down payment amount, which is $62,600.”

Thankfully, $62,600 is not the amount every buyer needs for a down payment in the United States. There are many different options available, especially for first-time homebuyers (millennial or not). That amount can also be significantly less, depending on the purchase price of the house.

According to the National Association of Realtors (NAR), “The median existing-home price for all housing types in August was $310,600.” (These are the latest numbers available). NAR also indicates that:

“In 2019, the median down payment was 12 percent for all buyers, six percent for first-time buyers, and 16 percent for repeat buyers.” (See graph below):

Do You Have Enough Money Saved for a Down Payment? | MyKCMThat means if a qualified first-time buyer purchases a home at today’s median price, $310,600, with a 6% down payment, in reality, the down payment only amounts to $18,636. That’s nowhere near $62,600.

Knowing there are also programs like FHA where the down payment can be as low as 3.5% of the purchase price for a first-time buyer, that up-front cost could be significantly less – as little as $10,871 for the same home noted above. There are also other programs like USDA and loans for Veterans that waive down payment requirements.

The Point2Homes study also shares how much millennials have indicated they’ve saved for a down payment. As we can see in the graph below, 39% have already saved enough for a down payment on a median-priced home. Another 47% are close to reaching that goal, depending on the purchase price of the home.Do You Have Enough Money Saved for a Down Payment? | MyKCMUnfortunately, the lack of knowledge about the homebuying process is keeping many motivated first-time buyers on the sidelines. That’s why it’s important to contact a local real estate professional to understand the requirements in your local area if you want to buy a home. A trusted agent and your lender can guide you through the process.

Bottom Line

Be careful not to let big myths about homebuying keep you and your family out of the housing market. Let’s connect to discuss your options today.

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