One of the most common questions that we get from first-time home buyers is, how much money do I need to save for a downpayment? For many people, saving money for a downpayment is one of the most challenging aspects of buying a home. In addition to paying rent, you also have other bills to pay, like utility costs, groceries, gas, etc. We understand that it can be challenging to set aside funds for a downpayment when you’re trying to make ends meet.
The good news is, there are many loan programs out there that are designed for first-time buyers living on a moderate income. Additionally, you may be able to use gift funds or grants to cover some of your expenses. Below, we’ve discussed down payments for first-time buyers in detail.
How Much Money Will I Be Required to Put Down?
Down payment requirements are usually dictated by the type of loan you choose. Your loan amount and financial circumstances also play a role.
Down payment amounts are expressed in terms of percentages. They are essentially a fraction of the amount being borrowed. FHA loans usually require a downpayment of about 3.5%. Down payment amounts for conventional loans vary but can be as low as 3%. VA loans do not require any down payment at all.
First-Time Home Buyer Average Down Payment
Down payments can be a confusing topic for first-time home buyers. Often, buyers come to us with the belief that they must put 20% down. They’ve heard repeatedly for years about the 20% idea and, therefore, are mistaken into thinking that this is how much they need to save.
What they don’t realize is that 20% is a recommendation, not a rule. Putting 20% down means you don’t have to pay for Private Mortgage Insurance (PMI). But you can still buy a home without putting down 20%.
In fact, the average down payment amount among first-time buyers is far lower. Most first-time homebuyers put down about 7% on average. However, even this figure isn’t truly representative of what’s possible. It’s still possible to qualify for a home loan with a lesser down payment.
Eligible borrowers may be able to get away with putting down as little as 3%. If you’re a military borrower and you’re eligible for VA benefits, you may be able to get a home loan with zero down.
Get Advice from an Expert
If you have questions about loans for buying your first home, please do not hesitate to reach out! We would be more than happy to assist you!