A down payment plays in to buying real estate often before the buyer even begins looking at available homes. Generally, it is an amount that the buyer saves up reaching some percentage of the sales price, varying on the type of home desired. The percentage is determined by the type of mortgage chosen and what is required.
It is a common misconception that the average down payment is 20% of the sales price of a home according the National Association of Realtors data. In reality, the average amount is just 12%. This overestimated cost can turn a lot of potential buyers away. To break it down further, the data says homebuyers between the ages 22 and 30 put down 6% and an additional 4% was paid by 31 to 40 year olds. That’s not to say making a larger down payment isn’t ideal as it can assist with the types of loans a buyer may qualify for; some lending agencies will provide a loan with a down payment as little as 3% while other options that require no down payment may be available through the VA or USDA. The larger down payment a buyer is able to pay generally decrease the interest rate which equates to smaller monthly payments. In addition, current mortgage rates are at historic lows, giving even more opportunity to purchase a home at a lower long-term cost.
Please don’t hesitate to reach out with any questions, comments, or concerns you may have about down payments or anything else real estate related.
Read more on this on the National Association of Realtors website here: https://magazine.realtor/daily-news/2021/07/12/consumers-still-overestimate-down-payment-requirements