Believe it or not, almost 80% of first-time homebuyers qualify for down payment assistance, but only 13% use it. And if you’re hoping to buy a home, this is a mission-critical gap to close – fast (see graph below):
Here’s what you need to know to make the most of your down payment in today’s housing market.
Amplify Your Down Payment Potential
For first-time buyers, the name of the game with down payments is ensuring you’re taking advantage of all the resources designed to help you. And many of them can get you to your goal faster than you may have thought possible.
For example, loan options, like Veterans, require as little as 3% down or even 0% for specific qualified borrowers.
Let’s not forget down payment assistance, like grants and other opportunities, that can help you cover the upfront cost of your down payment.
If you want to explore those options and what you can use to your advantage, connect with a trusted lender. Because if you don’t at least see what’s available, you could be leaving money on the table and missing your chance at buying a home.
These resources can boost your down payment. A higher down payment could help lower your eventual monthly mortgage payment and even avoid or reduce your fees like private mortgage insurance.
Don’t Let News Headlines About Down Payments Scare You
There’s one more thing to address. News coverage has been talking about how the typical down payment is rising. A report from Redfin states:
“The typical down payment for U.S. homebuyers hit a record high of $67,500 in June, up 14.8% from $58,788 a year earlier . . . This was the 12th consecutive month the median down payment rose year over year.”
But don’t let those high dollars scare you. Just because the average down payment is rising doesn’t mean down payment requirements are going up. Understanding that is a key piece of the puzzle.
It’s just because people are choosing to put more down to offset higher mortgage rates, and current homeowners who are putting their equity to work are using that to increase their down payment on their next home.
As HousingWire explains:
“. . . buyers are putting down a higher percentage of the purchase price to lower their monthly mortgage payment. And buyers also had more equity from their home sales, which gives them more cushion.”
Let’s break those two reasons down a bit:
1. A bigger down payment helps lower your monthly mortgage payment. Affordability has been a challenge for many buyers recently, which is why those who can make a bigger down payment will do so in an effort to lower their future housing costs.
2. Buyers who already own a home have a record amount of equity to leverage. Thanks to home price appreciation, someone who bought a house a few years ago has gained a significant amount of value.
These people can put down much more than the average first-time buyer who hasn’t owned a home yet.
Bottom Line
What’s the best thing to do? Talk with a trusted lender about your options. They’ll help you figure out where you stand today and how to access the resources you may qualify for. Because help is out there, you need to work with a pro to take advantage of it.
