Typical first-time buyers make 6% or 7% down payment on their first home.

Coming up with a large chunk of cash for a down payment is likely the first thing that comes to mind when people think of buying a house one day. But you probably don’t need as much money as you think. The idea of the 20% down payment as a standard dates back to the Great Depression, when mortgages were usually shorter than the 30-year term that is standard today. That’s a daunting figure at today’s prices. The typical house in the U.S. has a median price of around $400,000. Applying the 20% rule would mean you’d need $80,000. Close to 40% of Americans who don’t own a house point to a lack of savings for a down payment as a reason, according to a new CNBC Your Money Survey conducted by SurveyMonkey.

But in reality, “the typical first-time buyer has a down payment well under 20%,” said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors. More often, Lautz said, people come up with just 6% or 7% as a down payment on their first home. During the first quarter of 2023, the typical down payment on a single-family home represented 7.5% of the median price, according to ATTOM, a real estate data company. In that case, on the median-priced house in the U.S., you’d need around $24,000. Better still, there are programs available that may help many would-be homeowners put down even less. Some federal government-supported programs allow you to buy a house with no down payment, or a very low one. The U.S. Department of Agriculture, the Federal Housing Administration and Department of Veterans Affairs, among others, have programs with low down payments. Even as home prices and interest rates have risen, “homeownership is still the best option for building equity long-term,” said Daniel Brennan, director of MaineHousing. Some states, cities and other groups have programs that award grants to homebuyers that bolster their down payment or help cover closing costs.

Source: CNBC