You DON’T need 20% down to buy a home

“How America Views Homeownership” in a recent survey revealed that 68% of Americans feel that now is a good time to buy a home.  Of those that don’t already, 95% said they want to own a home.

“Over the last couple of years, the home buying process has changed in many ways,” Jason Stiltner from Charter One Bank said.  He continued, “But the survey found that Americans still want to own a home.  They also think this is a great time to make that purchase.”

But, there is confusion behind the numbers.  Many people that don’t currently own a home are concerned about taking the step to make the purchase.  They feel that qualifying for a mortgage or moving through the process is difficult and that they aren’t qualified.

74% percent of the people surveyed said they understand the process.  But some of follow up answer they gave suggested that they may not understand the process as well as they think.

• 30% of respondents believe that only individuals with high incomes can obtain a mortgage
• 64% of respondents believe they must have a “very good” credit score to buy a home
• 44% believe that a 20% down payment is required

Much of the above beliefs are unfounded.  

In a recent blog post, Freddie Mac confirmed that there are many people that have some of the facts wrong about the amount of money needed for a down payment.

“Did you know 40 percent of today's homebuyers using mortgage financing are making down payments that are less than 10 percent? And how about this: since 2010, the number of people putting down less than 10 percent for conventional loans has grown three fold.  So, not only are low down payment options real, they represent a significant portion of today's purchases.”

In a separate Executive Perspectives, Christina Boyle, Freddie Mac’s VP and Head of Single-Family Sales & Relationship Management explained further:

• A person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
• Qualified borrowers can further reduce the down payment coming out of their own pockets to 3 percent by lining up gifts from family, grants or loans from non-profits or public agencies.

Boyle talked about the importance of educating potential buyers:

“Letting more consumers know how down payments are determined could bring more qualified borrowers off the sidelines. Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 or 10 percent.”

Stiltner agreed with Boyle. “If prospective home buyers get the facts, they will feel empowered to ask lenders and real estate agents questions about available options, such as down payment assistance or FHA loan programs or VA loans for veterans.”

The bottom Line is get the facts and you are going to be pleasantly surprised.  

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.