What You Need To Buy A House: Debunking The 20% Down Myth

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Things have gotten a little easier…

Recently, real estate figures were released stating that the number of first time homebuyers is at its lowest point in almost 30 years.  While some blame the economy, the answer seems to be much simpler: lack of education of the current requirements to buy a home.  Over the past week, I’ve had several people express to me their desire to buy a home, but they don’t have (and don’t see themselves any time in the near future) 20% to put down as a down payment towards the purchase of a home.

The standard of 20% down is an old school one, and most first time homebuyers get their initial information from the ones closest to them: their parents.  And yes, in the 1980’s, 20% was the standard for a down payment, but not anymore.  Most programs, backed by the Federal Housing Administration or FHA, require very little, if anything, down.  Yup, you read that right…zero down.

Now, all mortgages have fees when the mortgage paperwork is signed, known as closing costs.  However, if you’re working with a talented realtor, these costs, which usually are in the neighborhood of $3-4,000, can also be negotiated to be paid by the seller.  So, yes, you can buy a house without bringing a dime to the table.

Now, does this mean you should be buying a house with nothing in the bank?  Of course not. With buying a home, comes other costs.  You’re probably going to want some fresh paint on the walls, and maybe…furniture.  Everyone should have a small “rainy day fund” to deal with any issues that might come up once you’re in your new pad.  With FHA-backed zero down programs, interest rates at historic lows, and First Time Homebuyer’s tax credits, this is really the best time it’s ever been to buy a home!

Justin is currently an associate with RE/MAX Advantage Group, working in both residential and commercial sales throughout Rhode Island. Feel free to contact him with any questions or assistance through his website, JustinFerland.com or (401)441-9401.