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Is it true that you need a 20% down payment to buy a home?
However, it is true that there are benefits when putting 20% down on the purchase of your new home. But many people can’t afford to do that and opt to put down less.
How much should you put down on a new home? Here’s what you need to know when making that decision.
Some of the best advantages of putting down 20% of a home’s purchase price upfront are:
The only negative of putting 20% down on a home is the extra time and sacrifice it takes to save that amount of money. For example, saving $50,000 for a $250,000 mortgage can be a substantial obstacle. It’s not surprising that the average down payment is just 6% for first-time homebuyers and 14% for repeat buyers.
It’s still a good idea to aim high for your down payment fund, so create a savings plan to help you reach your target.
Meanwhile, you can also explore alternatives and assistance like the examples below:
Sure, putting 20% down on a new home would be great, but it’s not realistic for a lot of folks. Do your best to build up your savings for your down payment so you can qualify for more programs and lower your monthly payments. Also, remember to keep your down payment savings separate from other savings (such as your emergency fund) and have extra left over for other home expenses like maintenance and furniture.
In some cases, it might make more sense to rent for another year or a few extra months to get your down payment fund in better standing. It could save you a substantial amount of money over the life of your home loan.
Saving for and buying a home is a big decision. Our dedicated colleagues can assist you through the process and help you reach your potential. To learn more about down payment assistance and low down payment options, and for personal assistance with finding the right mortgage, reach out to a Citizens One Loan Officer.