This myth can stop potential homebuyers cold. The median listing price in the U.S. is $385,000 [$1.1 million in Orange County]. You would have to have $77,000 [$220,000 in Orange County] readily available if you wanted to make a 20% down payment, an amount that can be daunting for a lot of people.
“It’s one of the biggest myths out there,” says John Mallett, founder of mortgage broker MainStreet Mortgage. “It stops more people from entering the market or even seeing if they can qualify.”
In reality, 20% down is more of a guideline than a hard and fast rule. In fact, the average down payment equals 12%. For first-time buyers it goes down to 7%.
Government-backed options, such as FHA loans and USDA loans, can be secured with as little as 3.5% down. If you are a member of the armed forces or a veteran and you qualify for a VA loan, you can buy a home with 0% down.
Conventional loans also don’t require a 20% down payment, but with less money down you will generally need to pay for private mortgage insurance. PMI costs 0.5% to 1% of your loan amount per year and is paid in monthly installments. So, if you have the money to pay 20% down, however, it can make sense to do it. Having more equity also protects you if home values fall.
You can also apply for a number of different grants and homebuyer assistance programs that can provide money for a down payment. These programs can include grants, forgivable loans and second mortgages that can provide partial or full down payment help. (Brokerage Redfin has put together a list of down payment assistance programs available nationwide and by state.)
CA Real Estate Group can find solutions for you and connect you with our preferred mortgage experts. Call us today!
Christine Almarines @christine_almarines
Realtor DRE # 01412944
714-476-4637 | christine@carealestategroup.
Michelle Kim @michellejeankim_homes
Realtor DRE # 01885912
714-253-7531 | email@example.com