Who says you need 20% down to buy a home? That legendary obstacle is a thing of the past. Many people 'assume' they don't have enough savings, but over 40% of borrowers put down 10%, or less, of the purchase price.
Gone are the days of 20% down or no loan, but recent surveys reveal that many Americans are not aware that programs exist to put down less.
Fannie Mae’s article, “What Consumers (Don’t) Know About Mortgage Qualification Criteria,” revealed that “only 5 to 16 percent of respondents know the correct ranges for key mortgage qualification criteria.”
The survey results revealed that consumers often overestimate the down payment funds needed to qualify for a home loan; 76% of respondents either don’t know (40%) or are misinformed (36%) about the minimum down payment required.
Many believe that they need at least 20% down to buy their dream home, but many programs actually let buyers put down as little as 3%. On the right are the results of a Digital Risk survey of Millennials who recently purchased homes.
Since buyers under 34 years old make up the largest share of first-time buyers, it should come as no surprise that 97% of them financed their home purchase, compared to 86% of all buyers.
What may come as a surprise to many who have not yet purchased, however, is that 16% of those who financed their home put 0% down! 61% of Millennials who purchased a home in 2016 put down 10% or less!
According to data from the last 12 months of Ellie Mae’s Millennial Tracker, the average down payment for a Millennial was 10%.
Your dream home could be within your reach much sooner than you ever thought if you only need to save up 3-10% instead of the 20% that you may have thought you needed!
Depending on where you live, median income, median rents and home prices all vary. So, we set out to find out how long would it take you to save for a down payment in each state?
By determining the percentage of income spent renting a 2-bedroom apartment in each state, and the amount needed for a 10% down payment, we were able to establish how long (in years) it would take for an average resident to save enough money to buy a home of their own.
What if you only needed to save 3%?
What if you were able to take advantage of one of the Freddie Mac or Fannie Mae 3% down programs? Suddenly, saving for a down payment no longer takes 5 or 10 years, but becomes attainable in under two years in many states.
Whether you have just started to save for a down payment, or have been saving for years, your dream home may be closer than you think!