You don’t need a 20% down payment to buy a house, economist says
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Coming up with the down payment as an aspiring homeowner can be a daunting task. Many have already begun working toward that goal.
About 77% of future homebuyers have started putting money aside for a down payment, according to a new survey by Clever.com, a housing and real estate research site.
More than half (57%) of potential buyers plan to put less than 20% down, the report found. The survey polled 920 recent and upcoming homebuyers in early April.
Buyers may try to put more money down to avoid mortgage insurance costs and even lessen monthly payments, but 20% is “definitely not required,” said Danielle Hale, chief economist at Realtor.com.
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In the first quarter of the year, the average down payment was 13.6%, up from 10.7% in the first quarter of 2020, according to Realtor.com.
The typical down payment for first-time homebuyers was 8% in 2023, compared to 19% for repeat buyers, based on transactions from July 2022 to June 2023, according to a survey from the National Association of Realtors.
Even at recent elevated levels, the average down payment is still well below 20%, a share that people typically think of as the gold standard when buying a home.
“By no means is this essentially the law of the land,” said Mark Hamrick, senior economic analyst at Bankrate.com.
‘The conundrum of the housing market’
One way to reduce your monthly mortgage payment is by putting down more money and borrowing less. But for many households, trying to accumulate a higher down payment can be challenging, Hale explained.
“It really showcases the conundrum the housing market is in where there’s not a lot of affordability,” she said.
Having enough savings for a down payment is a big hurdle for most buyers. Close to 40% of Americans who don’t own a house point to a lack of savings for a down payment as a reason, according to a 2023 CNBC Your Money Survey conducted by SurveyMonkey. More than 4,300 adults in the U.S. were surveyed in late August for the report.
Most homebuyers don’t put down 20%
Rising home prices make that 20% goal especially daunting. But the reality is, you don’t need 20%, experts say.
Nationally, the average down payment on a house is closer to 10% or 15%, Hale said. In some states, the average is well below 20% while some are even below 10%, she added.
“Not only is it possible to buy a home with less than 20% down, but this data show that a majority of buyers are in fact doing so,” Hale said.
Some loans and programs are available to help interest buyers purchase homes through lower down payments.
For example, the Department of Veterans Affairs offers VA loan programs that enable those who qualify to put down as little as 0%. Loans from the U.S. Department of Agriculture, referred to…
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