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First-time homebuyers often scramble to save for both their down payment and closing costs they will pay when finalizing their home loan. Down payments can be a misunderstood expense, starting with how much you’re expected to put down.
About 60% of first-time homebuyers overestimate how much they need for a down payment, according to Mortgage Guarantee Insurance Corporation. That confusion can delay a lot of buyers from accomplishing their dream of home ownership.
The truth is, the average down payment for first-time homebuyers is about 7%, based on results of a 2020 survey by the National Association of Realtors.
There are a lot of opinions about how much you need for a down payment on a house. But the amount you pay can vary depending on so many factors, including the type of loan, location of the home and your credit history. Your lender can help you choose the right down payment for you, and it could be less than you think.
It starts with understanding more about down payments. Here are four fast facts you should know, especially if you’re a first-time homebuyer.


1. What a down payment does.

A down payment is a percentage of your home’s purchase price that you pay upfront when you close on your home loan. The amount you put down shows your lender that you are making an investment in the home. That fact can influence whether the lender requires private mortgage insurance (PMI) and what interest rate you will pay for the life of the loan. You may get a lower interest rate if you make a bigger down payment.


2. You don’t need 20%.

One misconception is that you need at least 20% saved for a down payment, but the size of your down payment depends on the type of mortgage you choose. For example, an FHA loan from the Federal Housing Administration requires just 3.5% down. If you or your spouse served in the military, Veterans Affairs (VA) loans can be approved with Zero down. That same 0% applies to United States Department of Agriculture loans.  ASK US ABOUT OUR OTHER ZERO % DOWN PROGRAMS!
You can get approved for a conventional loan with as little as 3% down payment, but your lender will require PMI as protection in case you default on your loan


3. You make the down payment at closing.

While your lender may need to verify you have the funds early in the mortgage application process, your down payment won’t be due until you close on the loan, typically as a cashiers check or wire transfer. However, if you have promised earnest money with your offer, that sign of good faith to the seller will be required when the offer is accepted. It could then be subtracted from your down payment.


4. You can’t borrow a down payment.

Many first-time homebuyers get help from family with their down payment. This assistance must be in the form of a gift versus a loan. Your lender will inquire about the source of your down payment and will require a gift letter from the person who gave you the funds to verify that it is not a loan.
Down payments don’t need to be a mystery. Find a lender you can trust and ask questions about the mortgage process. You will discover that saving for a down payment is just one aspect of an exciting opportunity to own a home.