4 Misconceptions Buyers Have About Down Payments

Many home buyers, particularly those purchasing for the first time, fall for several myths about down payments and delay buying longer than necessary. They often believe, for instance, that they need a 20 percent down payment — saving for which could take 12.5 years on average for a median-priced home. In reality, they have access to lower-down payment products from the FHA, Department of Veterans Affairs, Department of Agriculture, Fannie Mae, and Freddie Mac. Although some lenders recommend putting down at least 20 percent, buyers need to take into account the other costs of homeownership — such as repairs, moving expenses, and appliance purchases, before determining whether it makes sense to sacrifice so much of their savings. Meanwhile, some buyers mistakenly believe that sellers will not accept an offer if a portion of the down payment comes from a gift or homeownership program; but experts stress that buyers need only have everything documented to give the sellers peace of mind and that these buyers actually have an extra cushion with which to bargain against rival bidders if such programs cover closing costs and other seller-paid costs. Finally, buyers might believe that it is more difficult to get financed for down payment programs, but they actually have approval processes similar to that for obtaining a first mortgage. However, buyers would be wise to start the approval process prior to finding their dream home. | Read More