down payment

What Is The Average Down to Purchase A Home?


What Is The Average Down Purchase A Home?

What is the average down to purchase a home? This is a wonderful and informative blog written by our preferred loan partner, Dan Tharp.  Enjoy! –JaCi Wallace. According to a Nerd Wallet 2019 Home Buyer Report, 62% of Americans think you need at least a 20% down payment to buy a home. Well, I am glad to report this is not true.

This myth may stem from something you have read about called private mortgage insurance. PMI is a type of insurance put in place if you put less than 20% down and default on your loan. PMI is arranged by the lender and protects the lender—not you—if you stop making payments on your loan.

Even though PMI may sound like a bad thing, there are benefits to putting less down in exchange for this added monthly fee. For many first-time homebuyers, saving 20% is herculean as it can take several years to build. For many, it’s more prudent to keep a 6-month reserve in the bank for emergencies or maybe some additional money for needed repairs and updates to your new home.

The good news, if you get a conventional mortgage (non-government, i.e., FHA or VA), once you reach 20% to 25% equity in your home, you can request to cancel your insurance – So it’s not there forever!

What Is The Average Down Payment On A House?

According to data from Attom Data Solutions, the average American pays about 6% for their down payment. Remember, there is no right or wrong or answer to how much you should put down. But here are some things to consider:

  • Do you have an emergency/reserve fund?
  • Are you a multiple-income-earning family, and what if one of you loses your job?
  • The condition of your home, and does it need repairs?
  • Look at your other debts.
  • Talk to your financial planner or mortgage advisor about what is best for you based on the loan program and your financial well-being.

While the average down payment is equal to about 6%, depending on your loan type and credit score, it’s possible to buy your home with as little as 3% down. Or, if you qualify for a USDA loan or a VA loan, you may be able to buy your home with no money down. So What is the average down to purchase a home? It is much less than what most buyers think.

Why Does Credit Matter?

Along with a low debt-to-income ratio and a solid financial history, you’ll want a high credit score to obtain the best mortgage rates. It’s a pretty simple formula – If you have demonstrated a history of managing your debt responsibly, then you are more likely to get the best rates and terms on your home loan. A good score, according to MyFICO, is 700. For the best rates, however, a score of 740 or higher is needed.

What if you have no credit? I have clients that are good at not taking on debt because they choose not to have credit cards and pay for things in cash. For these folks, it may be impossible to obtain a mortgage. To start building a responsible credit history, consider a low-limit credit card or a secured loan.

If you need a few pointers to improve your scores, call me. We can review a more detailed analysis of tricks and methods we have learned over the years. Also, we work with some very talented and local credit specialists that we can refer you to. You would be surprised at the big difference a small change can make. I hope you enjoyed this blog titled, what is the average down to purchase a home.

If you want to work with a knowledgeable Realtor, please call Weintraub & Wallace Realtors, with RE/MAX Gold. You can reach us at 916-233-6759. Our Loan Partner, Dan, can help you through the loan process, so give him a call.

In Gratitude,
Dan Tharp – Branch Manager – 916-257-1470
2250 Del Paso Rd. #A, Sacramento, CA 95834
NMLS# 280913

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