You might be eager to buy a new home, but the down payment has you questioning whether it is a realistic dream. The good news is that it may be more achievable than you think.
While a 20 percent down payment has been the traditional standard for purchasing a home, the fact is that it is not mandatory and there are loan options that have a much lower minimum requirement. That means you could be closer to your homebuying dream than you realize.
How Much Down Payment Do You Need to Buy a House?
According to the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. In fact, for all homebuyers today it’s only 15%; and just 8% for first-time homebuyers.
Lenders and government programs have different down payment requirements, depending on the type of loan being used. While most home buyers purchase homes with conventional loans, other financing options are available.
Types of Mortgage Loans
- Conventional loan: These loans don’t have backing from a governmental program and, therefore, have stricter standards for credit scores, debt-to-income ratio (DTI), and down payments. Specifically, first-time home buyers must provide a down payment of 3% or higher, and experienced home buyers must put down at least 5%.
- Federal Housing Administration (FHA) loan: Backed by the FHA, these loans require private lenders to follow government regulations when providing loans to borrowers with weaker credit and lower incomes. Because of the more flexible loan requirements, FHA loans require a 3.5% down payment for all buyers.
- Department of Veterans Affairs (VA) loan: VA loans are for veteran and active-duty military members and eligible surviving spouses. have minimal financial hurdles, and oftentimes do not require a down payment.
- U.S. Department of Agriculture (USDA) loan: USDA loans are for borrowers in qualifying rural areas with moderate financial requirements, and borrowers don’t have to have a down payment to qualify.
Down Payment Assistance
There also are a variety of resources available to help with a down payment. In fact, there are over 2,000 homebuyer assistance programs in the U.S., many intended to help with down payments. Your lender can help identify programs for which you may qualify. If you’re ready to become a homeowner, lean on your trusted advisors to find resources that can help you make your dreams a reality.
At Vutech | Ruff, Cutler Real Estate, our team is ready to help. We pride ourselves on our in-depth knowledge of the Ohio real estate market and financing options available for our clients.
Finding your dream home is one thing. Your dream experience is another. Contact us and let’s have a conversation.