Do you need 20% down to buy a home? Don't drain your bank account just yet.

Do you need 20% down to buy a home? Don’t drain your bank account just yet.

With home prices on the rise, saving for a down payment might seem out of reach. This is especially true for first time home buyers who don’t have equity in an existing house yet.

In 2021 homes saw an appreciation of over 17 percent. The average median house sold in Onondaga County was $185,000.00. That’s $37,000.00 down payment on the 20% rule! Now obviously the less you put down on your mortgage the higher your loan amount is going to be but let’s see how that looks with the two most common loan programs Conventional and FHA.

Conventional Loans

These loans are harder to qualify for giving them a more competitive edge in today’s market. Let’s breakdown the down payment options on the average home price of $185,000.00

3% DOWN PAYMENT: $5,550.00

This option is held for mainly first-time home buyers. If you’re not a first-time home buyer, there are ways you may still qualify for the 3%, Contact us today for more details.

5% DOWN PAYMENT: $9,250.00

This option may be the most appealing with conventional loans. You will also be looking at possibly a better rate and lower private mortgage Insurance.        

20% DOWN PAYMENT: $37,000.00

This option historically was the most common because at the 20% down you no longer pay Private Mortgage Insurance. With the rise in home prices this option doesn’t always make sense financially anymore.

FHA Loans

These loans tend to be more lenient and best financially for individuals who have trouble qualifying conventional. They are also insured by HUD meaning you are required to pay mortgage insurance. This insurance coverage does provide less risk to your lender meaning the cost savings can be passed to you through lower rates. 

3.5% Minimum DOWN PAYMENT: $6,475.00

This option is the most popular with FHA. This is close to the 3% the conventional loan offers but is an easier option to qualify for.

10% Minimum DOWN PAYMENT: $18,500.00

Most borrowers will qualify for the 3.5% minimum down but putting 10% down will shorten your mortgage insurance from 30 years to 11 years.

You can take comfort in knowing 20% down is not your only choice. There are many other down payment options your loan officer can discuss with you. If you’re ready to start exploring programs, contact us today.