Why A 20% Down Payment Isn’t Necessary

Traditionally, the down payment on a home is 20% to buy a new home.  Luckily, that’s not the barrier to entry that it used to be.  In fact, the average down payment last year on a new home was only 11% according to our loan records.

Now, there’s a lot of variation there.  Depending on what kind of loan you want, the down payment can change dramatically. There are multiple loan programs that can help, depending on your situation and how you want to pay off your home.

However, many people are signing up for an FHA loan, which has drastically lowered the amount needed for a down payment.  An FHA loan, backed by the Federal Housing Authority, only requires a 3.5% down payment, but also requires the borrower to pay PMI.  This mortgage has made it affordable for thousands of families to own their first home, which has helped stimulate the housing market after the 2008 crash.

There are also options like VA loans that can move you in for no down payment at all.  These loans have requirements to meet, obviously, but help bring the average down.

A traditional 20% down payment has its advantages.  It comes with a lower monthly payment and no PMI.  Usually, a refinance will be a conventional loan, as many homeowners build up their equity over that 20% threshold to get rid of their PMI.

There are ways to get to that 20% if you’re really determined.  Many people get a loan from their parents or save for years.  It’s just not necessary to buy a home anymore.  With FHA Loans and the 0% down payment options, the paradigm for down payments has changed.

If you are ready to buy a home, call us in St. Louis at (314) 781-9700, Chicago at (773) 770-4727, Indianapolis at (317) 550-1515 or Nashville at (615) 810-8555. You can always apply online at www.thehomeloanexpert.com, and we’re also open on Saturdays to better serve you. We work hard to make it easy on you.  Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?

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