Busting the 20 Percent Down Payment Myth


Arden | Las Vegas | Pardee Homes

Here’s some good news! If you’ve been saving for a down payment on your new home purchase, it might not take as long as you think.

Many would-be homebuyers believe they need to put 20 percent or more down to purchase a new home. But, the truth is far from the myth. Here’s what you need to know to start enjoying life in a new Pardee home sooner.

Down payment realities.
The reality is that the vast majority of homebuyers financed their purchase last year with a 6 percent or less down payment. The National Association of Realtors found that first-time buyers typically financed 94 percent of their new home purchase last year, while repeat buyers financed 84 percent on average. Those lower down payments mean less time needed to build up your new home nest egg.

Down payment options for your new home.
Lenders know that a 20 percent down payment is just not feasible for many buyers. That’s why they offer many zero- or low-down payment options. The VA and the USDA both offer zero-down mortgages to eligible borrowers. FHA loans can be secured for as little as 3.5 percent down. And, some lenders offer conventional mortgages with 3-5 percent down payments.

What is important? Credit score.
Your credit score can be your biggest ally when it comes to qualifying for low-down mortgage options. The higher your FICO score, the less risky and more attractive your new home loan is to lenders.

Before you begin your homebuying process, check your credit. Are there any errors that may be negatively affecting your credit score? Dispute them and look for other ways to improve your credit, such as reducing any outstanding debts.

Be prepared to purchase insurance.
Private mortgage insurance is a tool lenders use as protection in the event of loan default or foreclosure. Typically, lenders will require PMI on loans with less than a 20 percent down payment. Plan to pay about 0.5 to 1 percent of the total loan amount annually, added to your monthly payment.

Pre-qualify for a new home loan.
Mortgage interest rates are at historical lows. And with less down payment required, you may be able to achieve your home ownership dream sooner than you think. Talk to one of our New Home Advisors about pre-qualifying with our affiliated mortgage company, TRI Pointe Connect, to lock in a low rate.

Is the myth of a 20 percent down payment keeping you from the Pardee home of your dreams? Contact one of our New Home Specialists today.

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