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Buying a Home? What to Know about Down Payments


buying a home

(StatePoint) If you're in the market to buy a home, your down payment is probably top of mind. However, it’s important to understand all your options, particularly if you’ve heard the rule of thumb that you shouldn't pursue homeownership unless you can put 20 percent down.

“In today’s market, misconceptions about down payments are some of the most common, unfortunately” says Danny Gardner, Freddie Mac vice president of Affordable Lending. “And this discourages many prospective buyers from even leaving the starting gate.”

Gardner points out that a growing number of homebuyers are putting down between five and 10 percent, and even as little as three percent through products like Freddie Mac's Home Possible Advantage. This is important to keep in mind when determining how much home you can afford.

Prospective homebuyers concerned about down payments should also be aware that there are nearly 2,500 homeownership programs across the country that can help with down payment and closing costs, and an estimated 87 percent of U.S. homes are eligible for one or more of these programs, according to research by" rel="nofollow">DownPayment Resource. The down payment program benefit most frequently found is about $10,000, making researching these options and discussing them with your lender and real estate agent a worthwhile step. To determine your eligibility and learn more about down payment assistance, visit

Of course, home buyers should not forget that there are benefits to putting more down initially -- this will lower your monthly mortgage payment and reduce the amount you will owe the bank. Additionally, those who put down at least 20 percent don’t have to pay Primary Mortgage Insurance (PMI), an added insurance policy that protects the lender if you are unable to pay your mortgage. However, if putting 20 percent down will deplete all of your savings and leave you with no financial reserves, it's probably not in your best interest. What’s more, you can cancel your PMI once you’ve built equity of 20 percent in your home.

Don’t assume the dream of homeownership is beyond your reach. Get savvy! There are numerous programs and products available that can help you afford your down payment and beyond.
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