You may have heard that the target down payment on a house is 20%, but the reality is that most people can no longer afford such a large up-front investment. For first-time homebuyers who have yet to build up their equity and/or savings accounts, this can be especially true.
While the average down payment is 12% nationwide, this number is closer to 6% for those purchasing their first home. But in a 2019 study by Nerdwallet, up to 62% of buyers believe that the 20% benchmark is a requirement, so this number threatens to keep willing and able homeowners out of the market for unrealistic reasons.
The truth is that many loan programs require low or no down payments, so it’s always worth speaking to a NOVA Loan Officer about your options. For instance, conventional loans can require as little as 3% down, FHA loans as little as 3.5%, and VA loans often allow for zero down payment when the house in question meets the guidelines set by the Department of Veterans Affairs.
However, it will always be true that a higher down payment will ease the long-term aspects of a home loan. If you are able to put down the magical 20%, you will likely not have to pay for mortgage insurance, your monthly payments will be lower, and you might qualify for considerably lower interest rates.
As a rule, you shouldn’t be draining your entire savings account for a down payment. You’ll want to keep some money on hand for closing costs and anything unexpected that life might throw your way. Additionally, new homeowners often need to spend a considerable amount on their investments, including appliances, furniture, and repairs small to large.
Speak to a NOVA Loan Officer near you today to discuss your situation and ask about our down payment assistance program!