When it comes to getting a mortgage, particularly among first-time buyers, the down payment is often a huge area of concern. Popular perception of the down payment, which is paid up front at closing as part of a mortgage loan, has built it up to be one of the most significant financial hurdles for buyers to clear during this process.
At City Creek Mortgage, we’re here to make the down payment simpler and less imposing. Let’s go over some of the basics on average down payment sizes – chances are, these vary pretty wildly from what you may have heard are the “requirements” for down payments to obtain a new home.
Average Payment Sizes
Within the mortgage world, there’s a common misconception that to get a new home, you absolutely must have 20 percent of the total home cost saved up in advance for a down payment. This is often bandied around as the threshold at which a lender will not require you to pay additional monthly private mortgage insurance to help cover them in case of a default on the loan.
That’s simplifying things a bit too much, however – many buyers don’t pay anything close to 20 percent down. There are several loan programs that offer assistance with down payments, or even programs that require no down payment whatsoever. According to the National Association of Realtors, the median down payment for first-time buyers over the last few years has been 6 percent. That’s despite nearly 90 percent of buyers believing they had to have at least 10 percent down to qualify.
Calculating Down Payments
Calculating a down payment based on a percentage is about as simple as it comes. The down payment is tied directly to the purchase price of the home, meaning all you need is some basic multiplication – a home worth $200,000 and an expected down payment percentage of 10 percent would lead to a down payment number of $20,000.
For more on average down payments and what you need to save in advance of a home loan, or to learn about any of our mortgage solutions, speak to the pros at City Creek Mortgage today.