Down Payments are not as BIG as You Think!

If a big down payment is preventing you from buying a home, you may want to reconsider and start shopping.

The Harvard Joint Center for Housing Studies recently estimated that about 50 percent of the 25- to 34-year-old renters in the top 85 metropolitan areas have the income and credit scores to qualify for a mortgage today. That’s approximately 5.5 million renter households.

So why are these potential new homeowners not shopping for a home? According to Freddie Mac’s Christina Boyle, they are misinformed about the required down payment. Consumers persistently overestimate the size of a down payment they need in order to finance a home. Specifically, 38 percent of those ages 25 to 29 and 42 percent of the 30 to 34 bracket said lenders demand down payments of 15 percent.

As many as 72 percent of first-time home buyers don’t believe they can get a mortgage and are underestimating their potential for qualifity for a conforming, conventional mortgage with a low down payment. The statistics for 2014 show that one-in-five borrowers who took out conforming, conventional mortgages put down 10 percent or less.

Bottom Line: if you are ready to buy a home and you have your finances in order, start shopping. Your down payment may not need to be as big as you think. Be sure to speak with a Real Estate Professional to find out more.