Buying your first home: Low down payment a major perk
Many first-time buyers preparing to enter the housing market are unaware they don’t need a hefty down payment when making one of the most important investments of their lives.
According to research from the National Association of REALTORS® consumers across all income brackets, education levels and ages believe that a 20 percent down payment is required for the cost of the home.
However, the average median down payment has been 5 percent for first-time buyers for decades with some mortgage programs as low as 3 percent, depending on credit.
This misconception is holding back many potential first-time buyers, said NAR, who incorrectly believe they do not have enough cash on hand to purchase a home.
“Purchasing a home is not a regular event,” said Tom Simon, real estate broker and owner of Howard Hanna Real Estate Services in Belle Vernon.
He recommended buyers speak with a real estate professional to help guide them through the process that could end up saving thousands of dollars.
Scott Cavinee, a broker with SWC Properties in Uniontown, stressed designation by the United States Department of Agriculture declaring all parts of Fayette County as rural has played a major factor in making home ownership more affordable.
With USDA home loans requiring no down payment for qualified buyers, Cavinee said some are also fortunate to have sellers pay the closing costs.
“They can get in with little money down out of their pocket and many times less than what they pay for rent,” said Cavinee.
Results from NAR’s Housing Opportunities and Market Report (HOME) third quarter consumer survey indicate that first time home buyers awareness of low down payment mortgage options was minimal across all income and education brackets.
The survey further found that fewer than 20 percent in each group indicated that they need 10 percent or less to finance their home purchase.
Those ages 65 and older and under the age of 35 were the most likely to believe that they need more than 20 percent.
The survey also found that a misconception about how much of a down payment is needed to buy could be unnecessarily delaying some qualified young adults from entering the market.
“Obtaining a mortgage isn’t as difficult as it was in the immediate years after the downturn,” said NAR President Tom Salomone.
According to Paula Shaffer, president of the Fayette Board of REALTORS®, there are a number of federal mortgage programs that require little or no down payment, like USDA.
“Credit has a lot to do with what’s available,” said Shaffer. “When people try to get pre-qualified we tell them to shop around.”
Realtor.com. reported that first-time home buyers are ready to make a comeback and now make up 52 percent of prospective buyers looking to purchase in 2017.
The report went on to state the absence of first-time buyers has been one of the biggest abnormalities of the housing market in recent years.
If they return, it could provide a big boost to sales and serve as a sign that the housing market is returning to normal after years during which most new households being formed were apartment-dwellers.
Bankrate provides the following tips for first time home buyers:
n Check your credit.
n Evaluate assets and liabilities.
n Organize documents.
n Get qualified.
n Figure out your down payment.