Consumers often overestimating the down payment needed to buy a home, according to Christina Boyle, vice president and head of single-family sales at Freddie Mac.
Consumers believe they need 11 percent to 15 percent in order for lenders to approve them for a loan, according to a survey of renters and non-home-owners conducted by Zelman & Associates in New York. Thirty-nine percent say they need at least 15 percent of the purchase price in order to qualify for financing. Only 28 percent of respondents say they would even qualify for a mortgage.
But in reality, home buyers often can qualify for a conforming, conventional mortgage with a down payment of as little as 5 percent — and sometimes even 3 percent — Boyle writes. So far in 2014, more than one in five borrowers who took out conforming, conventional mortgages put down 10 percent or less.
Boyle says that buyers should also be encouraged by the abundant down-payment assistance programs that exist to help break into home ownership. Every state in the U.S., as well as many cities and counties, offer down-payment assistance programs for qualified borrowers, such as the American Dream Downpayment Initiative and HOME Investment Partnerships Program.
Source: “Down Payments: Today’s Most Persistent Misconception About Mortgages,” Freddie Mac (June 16, 2014)