Is a 20% Down Payment Really Necessary To Purchase a Home?

<article class="post-37165 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-37165"><span class="entry-date">September 22, 2021</span><div class="entry-header center-block text-center"><h1 class="entry-title">Is a 20% Down Payment Really Necessary To Purchase a Home?</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=Is+a+20%25+Down+Payment+Really+Necessary+To+Purchase+a+Home%3F&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fis-a-20-down-payment-really-necessary-to-purchase-a-home%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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<p><img alt="Is a 20% Down Payment Really Necessary To Purchase a Home? | Simplifying The Market" class="webfeedsFeaturedVisual wp-post-image" decoding="async" link_thumbnail="" loading="lazy" sizes="auto, (max-width: 549px) 100vw, 549px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2021/09/17143210/20210922-KCM-Share-549×300.jpg" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2021/09/17143210/20210922-KCM-Share-549×300.jpg 549w, https://files.simplifyingthemarket.com/wp-content/uploads/2021/09/17143210/20210922-KCM-Share.jpg 750w" style="display: block; margin-bottom: 5px; clear:both;max-width: 100%;" width="358"/></p>
<p>There’s a common misconception that, as a <a href="https://www.simplifyingthemarket.com/2021/09/10/fact-or-fiction-homebuyer-edition-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2">homebuyer</a>, you need to come up with 20% of the total sale price for your down payment. In fact, a recent survey by <a href="https://www.lendingtree.com/home/mortgage/homeownership-renting-survey/"><em>Lending Tree</em></a> asks what is keeping consumers from purchasing a home. <strong>For over half of those surveyed, the ability to afford a down payment is the biggest hurdle.</strong><span id="more-45190"></span></p>
<p>That may be because those individuals assume a 20% down payment is necessary. While putting more money down if you’re able can <a href="https://www.simplifyingthemarket.com/2021/03/01/what-are-the-benefits-of-a-20-down-payment/?a=712984-fa409495d5d70154d03a25e81e9540e2">benefit</a> buyers, putting 20% down is not mandatory. As <a href="https://sf.freddiemac.com/articles/insights/down-payments-helping-future-borrowers-bridge-the-awareness-gap"><em>Freddie Mac</em></a> puts it:</p>
<blockquote>
<p>“<em>The most damaging down payment myth—since it stops the homebuying process before it can start—<strong>is the belief that 20% is necessary</strong>.”</em></p>
</blockquote>
<p>If saving that much money sounds overwhelming, you might be ready to give up on the dream of homeownership before you even begin – but you don’t have to. According to the <a href="https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers"><em>Profile of Home Buyers and Sellers</em></a> from the <em>National Association of Realtors</em> (NAR), the median down payment hasn’t been over 20% since 2005. <strong>It may sound surprising, but today’s average down payment is only 12%.</strong> That number is even lower for <a href="https://www.simplifyingthemarket.com/2021/08/20/options-for-first-time-homebuyers-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2">first-time homebuyers</a>, whose average down payment is only 7%.</p>
<p>Based on the <a href="https://www.nar.realtor/sites/default/files/documents/2021-home-buyers-and-sellers-generational-trends-03-16-2021.pdf"><em>Home Buyers and Sellers Generational Trends Report</em></a> from NAR, the graph below shows an even closer look at the down payment percentage various age groups pay:<a href="https://files.simplifyingthemarket.com/wp-content/uploads/2021/09/17143211/20210922-MEM-Eng-1.png"><img alt="Is a 20% Down Payment Really Necessary To Purchase a Home? | Simplifying The Market" class="aligncenter wp-image-45192" decoding="async" height="488" loading="lazy" sizes="auto, (max-width: 650px) 100vw, 650px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2021/09/17143211/20210922-MEM-Eng-1.png" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2021/09/17143211/20210922-MEM-Eng-1.png 1000w, https://files.simplifyingthemarket.com/wp-content/uploads/2021/09/17143211/20210922-MEM-Eng-1-400×300.png 400w" width="650"/></a>As the graph shows, the only groups who put 20% or more down on average are older homebuyers who likely can use the sale of an existing home to fuel a larger down payment on their next home.</p>
<h4><strong>What does this mean for you?</strong></h4>
<p>If you’re a prospective homebuyer, it’s important to know you don’t have to put the full 20% down. And while <a href="https://www.simplifyingthemarket.com/2021/04/19/how-much-time-do-you-need-to-save-for-a-down-payment/?a=712984-fa409495d5d70154d03a25e81e9540e2">saving</a> for any down payment amount may feel like a challenge, keep in mind there are programs for qualified buyers that allow them to purchase a home with a down payment as low as 3.5%. There are also options like VA loans and USDA loans with no down payment requirements for qualified applicants.</p>
<p>To understand your options, you do need to do your homework. If you’re interested in learning more about <a href="https://www.simplifyingthemarket.com/2020/10/27/how-down-payment-assistance-opens-the-door-to-homeownership/?a=712984-fa409495d5d70154d03a25e81e9540e2">down payment assistance</a> programs, information is available through sites like <a href="https://downpaymentresource.com/"><em>downpaymentresource.com</em></a><em>.</em> Be sure to also work with a real estate advisor from the start to learn what you may qualify for in the homebuying process.</p>
<h3><strong>Bottom Line</strong></h3>
<p>Don’t let the myth of the 20% down payment halt your homebuying process before it begins. If you want to purchase a home this year, let’s connect to start the conversation and explore your options.</p>
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