Homebuyers Need 20% Down

A home is likely the biggest purchase you'll make, so it’s not surprising that saving for a down payment is a major hurdle on the path to homeownership. While a 20 percent down payment may be ideal for several reasons, it’s not actually as common as you might think, nor is it required to buy a home.

In a recent research study, the National Association of Realtors (NAR) reported that repeat buyers put an average of 16 percent down and first-time buyers put just an average of 6 percent down on the purchase of their new home..

Why is 20 Percent Considered Ideal?

If you are able to come up with a 20 percent down payment, these are the primary benefits:

• It will give you more equity faster and result in a smaller monthly mortgage payment.

• It can help you qualify for a lower interest rate (which can help you save thousands over the life of your loan).

• Putting that larger amount down lets you avoid paying private mortgage insurance (PMI). PMI is the lenders' protection in the event that you default on your mortgage. If you are unable to put 20% down, lenders will typically look at the loan as a riskier investment and will require that you take out PMI. PMI may cost between 0.5% to 1% of the entire mortgage loan amount annually.

• Finally, in competitive markets - like here in the Denver metro area - a larger down payment will likely make you a more attractive buyer and stand out to the seller if there are multiple offers on the home.

Overwhelmed?

Don’t be. You don’t need to figure this all out on your own - you just need to talk to a really good mortgage consultant. A good consultant will walk you through options based on your personal situation (down payment savings, credit score, income level) - and help you develop an actionable plan to make your next home purchase a reality.

Having gone through many purchase transactions, I can tell you from experience which lenders did (and did not) live up to their client's expectations. Some people still think agents get kickbacks for lender referrals, but the Real Estate Settlement Procedures Act (RESPA) strictly prohibits anyone from receiving any sort of payment in exchange for a referral on a federal mortgage loan. My recommended mortgage consultants earned their preferred status by consistently delivering an exceptional borrower experience AND the best rates - nothing else. I always recommend you talk to at least two lenders to help identify the partner with - yes, you guessed it - the best service and the lowest costs.

Kelly Halbrook
Platte River Mortgage
1643 Boulder St. #102
Denver, CO 80211
o: (303) 433-9900
c: (303) 433-9907
kelly@platterivermortgage.com

- Chris Hawksley | Realtor, Broker Associate -

Need more guidance?

Download my comprehensive Buyer’s Guide, or contact me to let me know how I can help.