38% of people between the ages of 25-29 and 42% of those between the ages of 30-34 believe that a minimum of 15% is required as a down payment to purchase a home, according to a recent survey by Zelman & Associates. A recent questionnaire administered by Freddie Mac showed that over 50% of all respondents thought 20% was required as a down payment. Many still tend to think that a large amount of money is need upfront when buying a home. In actuality, a purchaser may be able to put down far less.
Freddie Mac confirmed that there is misinformation regarding the amount necessary when determining the down payment for a home purchase: “Did you know 40 percent of today’s home buyers using mortgage financing are making down payments that are less than 10 percent? And how about this: since 2010, the number of people putting down less than 10 percent for conventional loans has grown three fold. So, not only are low down payment options real, they represent a significant portion of today’s purchases.” In a separate Executive Perspectives, Christina Boyle, Freddie Mac’s VP and Head of Single-Family Sales & Relationship Management explained further:
Today, a person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
Qualified borrowers can further reduce the down payment coming out of their own pockets to 3 percent by lining up gifts from family or grants or loans from non-profits or public agencies. On the average priced home in the Twin Cities Metro, $211,000, that’s about $7,000 and you’re a home owner.
Ms. Boyle goes on to explain: “Letting more consumers know how down payments are determined could bring more qualified borrowers off the sidelines. Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 or 10 percent.”
Take-away: If you are saving for either your first home or that perfect move-up dream house, make sure you know all your options. You may be pleasantly surprised.
Source: KCM blog