Senior Loan Officer | NMLS #316198
Branch NMLS #1270689
Posted On February 19, 2020
A down payment can be one of the largest barriers to homeownership, especially for first-time home buyers. A 2019 TransUnion analysis found that first-time home buyers are getting younger, as Millennials and Generation Z are moving towards homeownership. However, the survey also revealed that many first-time buyers believe potentially harmful misconceptions about the home buying process. A staggering amount of the participants surveyed were particularly misinformed about down payment information. Researchers at DownPaymentResource.org combats the most common down payment myths.
According to the TransUnion survey, 41% of young home buyers believe that a high down payment is needed to purchase a home. There are several low down payment loans available, some with requirements as low as 3%. In fact, a lower down payment may be more beneficial for new buyers, as it provides a valuable cash cushion. As shown by the JPMorgan Chase & Co. Trading Equity for Liquidity report, having at least three months of mortgage payments available is a better gauge of homeownership success than a large down payment.
Within the Homeownership Program Index (HPI), there has been an increase in the share of down payment and closing cost assistance programs. In fact, 77% of programs are down payment or closing cost assistance programs, which is a 6% increase from the previous HPI reading.
While homeownership programs, such as down payment assistance programs, are often marketed toward first-time home buyers, many do not have a first-time buyer requirement. In fact, 41% of homeownership programs do not have a first-time home buyer requirement. While some programs have a first-time buyer requirement, the eligibility may be broader than the name suggests. According to HUD, the official definition of a first-time home buyer is someone who has not owned a home in at least three years.
Down payment assistance programs are available in every market in the United States. While there may be more options in some areas, there are still several programs available in your city or county as well, no matter where in the country you live. According to the HPI, 70% of down payment programs are available in a specific area, such as a city or country. The other 30% of programs are available statewide through your state’s housing finance agencies. The states with the greatest number of down payment programs are California, Florida, and Texas.
Down payment assistance programs are available in every market, including high-cost areas. 11% of programs offer incentives and benefits for community service workers, such as teachers, police officers, firefighters, EMTs, and healthcare workers. Additionally, more than 6% of programs have benefits available for Veterans and active duty military. These programs are also able to be combined with VA loans, which do not require any down payment.
A down payment does not have to stand in the way of homeownership. With over 2,400 homeownership programs nationwide, there is a program available for every situation. Most loans do not require a high down payment, and data shows that a lower down payment can be more beneficial for first-time home buyers. If you have any questions about down payments, down payment assistance, or homeownership programs, let me know.
Conventional Payment example: If you choose a $250,000, 30 year loan at a fixed rate of 4.00% (APR 4.15%), with an LTV of 80%, you would make 360 payments of $1,215.26 Payment stated does not include taxes and insurance, which will result in a higher payment.