One of the most common reasons given by those who continue to rent when they want to buy a house of their own, is they continue to labor under the impression they cannot qualify for a mortgage until they have at least 20 percent of the cost of the house in savings for a down payment. However, in an age when rents keep going up and eating into the budget, the harder it is for a renter to put anything away in savings and certainly not enough to hit that magic “20%” they think isrequired.
In a study called “Barriers to Accessing Home Ownership” published by The Urban Institute, Freddie Mac, and Down Payment Resource, approximately 39% of renters labor under the mistaken belief that you need a down payment of 20% or more. The same report showed that 30% of current homeowners are also under the same impression.
The same study concluded that only 12% of renters and 13% of current homeowners were aware that there are multiple low percentage down payment programs that exist. When you stop to think about these numbers, they show that thousands of people continue to rent facing a constant uphill battle to scrape even a small amount of money together to go into their “buying our house” savings account.
You Would Not Believe How Low It Can Go
The “It” we are talking about in this case is the down payment. While so many continue to believe the 20% myth, others are cashing in on the opportunity to finally get out of the rental trap and into “home of their own” with down payments far below this figure. In 2018 the average down payment nationwide was only 5%.
That’s right only FIVE PERCENT! This means there are a lot of people out there who continue to pay their rent every month. In essence, if you are paying rent, you are paying your landlord’s mortgage when you could be paying your own and building equity at the same time. More than this, in many cases your monthly mortgage payments could be lower than your current rent.
There are two problems with continuing to rent. First you are paying some else’s mortgage. Second and one of the most common reasons given for not being able to hit the mythical 20%, is that the cost of living is going up faster than most people’s paychecks. With this in mind, many would be homeowners will never reach their goal. Research shows that more than 45 million “Millennials” are in a position to buy a home rather than renting one based on their income, credit, and current debt load.
If you are among those are planning to buy a new home within the next five years, the best thing you can do for yourself is to schedule a meeting with your local real estate professional. They can go over the numbers with you, check your credit scores and determine your ability to find a mortgage with far less than 20% for your down payment. You might be closer to your dream home than you ever imagined.