NAR’s research finds few adults 34 and younger (just 13%) realize they can buy a house with a down payment of 5% or less.
These low-down-payment programs aren’t new. The FHA has backed home loans with 5% down or less since the 1980s. Conventional loans, mortgages that aren’t directly backed by the government, have had them since the 1990s.
Consider the typical down payments for different types of loans for the 12 months ending May 2017, according to mortgage lender systems provider Ellie Mae. This information represents an 80% sample of all of the mortgage applications the company processes — about 30% of total loan volume in the U.S. — and is for all purchase loans, not just to first-time buyers.
Conventional loans, the mortgages lenders prefer to make, can have down payments as low as 3% for qualified buyers. Some lenders offer grants to allow even lower money down. But for the past 12 months, most buyers seeking conventional financing put down 20%, according to Ellie Mae.
FHA loans, often the go-to solution for first-time buyers of modest means, require a minimum of 3.5% down, and sure enough, loan-to-values for the period averaged 96%, probably due to rounding.
VA loans are famous for offering mortgages that require no down payment at all. Still, Loan-to-values averaged 98% over the past year, likely due to borrowers financing their closing costs.
20% is good - but not mandatory. It eliminates the need for mortgage insurance and will likely earn you a lower mortgage rate. Make sure to explore all their options when considering your home purchase.