Are You Missing Out?

The majority of consumers continue to mistakenly believe they need at least a 20% down payment to purchase a home, but the truth is the average down payment among all buyers is just 12%, according to National Association of REALTORS® data. Younger buyers tend to put down the least: For example, those between the ages of 22 and 30 put down an average of 6%, and those between the ages of 31 and 40 make an average 10% down payment. Financial experts often say a 20% down payment is ideal because it helps borrowers qualify for a mortgage and avoid the extra costs of private mortgage insurance. But it’s not always practical advice.

Many conventional lenders allow buyers to purchase a home with a down payment as low as 3%, while some government-backed programs such as VA issue loans with no money down. Borrowers may find such options through FHA, USDA, or VA loans as well as down payment assistance programs. Young adults, in particular, may be missing out on key information to move forward in the housing market. Two out of three recently surveyed say they are waiting for lower mortgage rates before starting the homebuying process, according to a survey of 1,000 millennials (ages 25 to 40) conducted by Lombardo Homes. However, economists have largely predicted that mortgage rates will edge upwards as the year progresses. Further, one in four millennials underestimated their buying potential by $150,000 or more, the study finds. Real estate pros are in position to educate buyers on common terms and financing resources.

Source: Motley Fool