We’ve all heard that it can be tough for new buyers to afford a home these days, and that one of the common obstacles is that many aren't able to save enough for that hefty down payment. Because there are a number of programs out there that help buyers borrow with less than 20 percent down, you might think that the number getting loans with the traditional down payment would be stagnant, but surprisingly that’s not the case. In a new report this month, it looks like more and more borrowers are putting 20 percent down now, and the numbers are continuing to trend upward.
As we can see in the infographic from the National Association of Realtors, as recently as 2014 only 34 percent of borrowers put down 20 percent. In 2011 and 2012 it was lower. But since then the number has been rising steadily and it looks like the upward trend shows no sign of stopping.
What does this trend mean? Well, it’s good sign for the industry as a whole, signalling the improving situation of a significant number of buyers. If more buyers are able to put 20% down, they’ll be able to take advantage of the historically low rates right now, and will enter their new ownership situation with greater equity which could mean the possibility for even an even sooner move up to higher value properties, or greater flexibility in home renovations or even purchase of investment properties. It may also indicate an influx of more affordable homes across all markets, which is something the industry has been clamoring for, and the home builders are beginning to provide.
The economy continues to grow with jobs increasing and incomes rising as well, all good news for the housing market. Meanwhile home ownership rates are at 50 year lows, so obviously there’s going to be steady demand for homes and an already high number of potential buyers with a desire to own. For those who fall into that category and don’t have enough for 20 percent down, it is important to remember all the avenues available to help on the path to homeownership. Borrowers can get FHA loans with only 3.5 percent down, and conventional loans that are backed by Fannie Mae and Freddie Mac can require as little as 3 percent. Everyone’s circumstances and timetables are different but there are options, and having a clear plan for a down payment and knowing those options is key.
If you have questions about any of this, or with any of your real estate needs, contact us today!