Find Out Why More Than Half of Buyers are Wrong About Down Payments

True or false: if you’re buying a home, you need to have at least a 20% down payment? If you answered true, you aren’t alone—so did 62% of Americans.

But in reality, that couldn’t be further from the truth—and you don’t have put off your home-buying dreams just because you can’t come up with 20% down!

While a 20% down payment will help you avoid private mortgage insurance (PMI), it isn’t some sort of home-buying hurdle that you must clear in order to buy. In fact, it’s far from the most common amount that U.S. buyers put down!

Here’s the truth about down payments—and why you shouldn’t let that 20% number prevent you from reaching your buying goals.

The Truth about Down Payments

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According to NerdWallet’s 2019 Home Buyer Report, around 6 in 10 Americans think you need a 20% down payment in order to buy a house. Because of this, they also tend to think that it takes several years to come up with the necessary funds for buying.

Unfortunately, this way of thinking unnecessarily postpones plenty of people’s home-buying dreams!

The truth? The most common down payment amount—put forward by around 32% of buyers—was just 5% or less. Put that in terms of concrete amounts, and it translates to just $7,500 on a $150,000 home or $15,000 on a $300,000 home.

Other Common Down Payment Amounts

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While 5% or less is the most common down payment amount, it’s still just one of the many options that buyers choose. Here’s how the rest of the numbers break down:

  • 16% of buyers put down 6 – 10%
  • 23% of buyers put down 11 – 20%
  • 18% of buyers put down more than 20%
  • 10% of buyers bought their home outright

A 20% down payment is a great goal, but you don’t have to feel locked into that amount! Instead, consider how much money you’d feel comfortable with putting down, then work from there.

Buyers are Optimistic

A woman packing up her home and writing on a cardboard box.

Despite prevailing misconceptions about down payments, buyers are still feeling optimistic about the market. Around 42% of Americans feel better about their home-buying prospects this year, which is up almost 20% from last year.

Additionally, 44% of people say that the current economic and political conditions make them more likely to buy in the next year, which is around a 10% increase from last year.

Long story short? Now’s a great time to buy!

Find Your Dream Triangle Home

Buying a home is major step, so it’s important that you have trusted and experienced professionals on your side. At Linda Craft & Team REALTORS®, we have over 300 years of combined real estate experience, making us well-equipped to provide you with everything you need to find home-buying success.

Take some time to explore our resources for home-buyers, learn a little more about what our past clients have to say, and use our specialized search tool to narrow down your options. Once you’re ready to get started, we’d love to talk details!

How to Buy a Home: Your Step by Step Guide

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Homeownership is closer than you think!

If you’ve long been considering buying a home in the greater Raleigh area, now is the time to act. You might be worried about the financial side to buying a home: the hefty down payment and the mortgage approval process—but it’s really not that complicated.

In fact, there are ten simple steps to buying your first home in the Raleigh real estate market!

Save Your Down Payment

It’s a common misconception that you have to put down 20% of the home’s overall value. That’s simply not true!

There are a number of loans out there that require less than 20%, with some like the USDA Loan requiring only a 3% down payment and the VA loan requiring 0% down!

While it’s true that the more you save up for a down payment, the lower your monthly mortgage payments will be, 20% is not the end-all be-all.

Determine Your Credit Score

A man using a marker to circle different numbers on a graph.

Whenever you’re making any large purchase that requires a loan, it’s important to have a handle on your finances. Use a free service like CreditKarma or FICO to check your score. This will give you a good idea for what kind of interest rates the bank is willing to offer you.

Find an Agent

While it is possible to buy a home without an agent, it is twice as stressful. An agent handles a lot of the “invisible work” associated with buying a home.

In addition to handling negotiation and closing, your agent can make recommendations on local neighborhoods and homes for sale. Plus, they’ll likely be able to offer you support as you navigate a tricky real estate market.

Get Pre-Approved

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Trust us, getting pre-approved for a mortgage loan will make the rest of your home-buying experience easier.

This process typically includes sitting down with a lender to review your finances. The lender will go over your credit score, savings, outstanding debt, annual income, and anything else relating to your money situation. Then, they’ll give you an offer for the amount of money (and the interest rate) the bank is willing to lend you. Boom: your budget is set.

Go Shopping

Now it’s time for the fun part! Think long and hard about what you want in a home, and get to searching. To make it a little easier on you, feel free to use our complimentary home-search tool.

You can easily filter results by price, location, neighborhood, size, special features, and more. Happy house hunting!

Make an Offer

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Once you’ve found a home that you can’t live without, work with your agent to make an appropriate offer. It’s important to make an offer that is both competitive enough to sway the seller, while still staying within your budget.

Remember that pre-approval letter? This makes you a more competitive buyer as well!

Get an Inspection AND an Appraisal

This is crucial. Before you sign any closing documents, you HAVE to make sure the home is a worthwhile investment. The best way to do that is by hiring an inspector to come out and review the property. This way, if there are any hidden issues with it, you’ll be able to negotiate with the seller to have it fixed.

After the inspection, your lender will arrange for a home appraisal. This is to assure the bank that your new home is worth the price you’ve agreed to pay for it.

Close the Sale & Move In

Once your loan is approved, your bank will schedule a closing date. This is when you cross your T’s and dot your I’s.

Congratulations! After some heavy negotiating and serious home shopping, you’ve finally found your dream home and made it your own.

Ready to Become a Raleigh Homeowner?

We can help with that. At Linda Craft & Team REALTORS®, we have the experience necessary to help you find the home of your dreams at the right price tag. Give us a call today to get started.