An Op-Ed by RE/MAX CEO Dave Liniger posted on the Investor’s Business Daily website assures potential homebuyers that they don’t need a large down payment to become a homeowner. The Op-Ed titled “The Down Payment Myth Stumps First-Time Homebuyers” debunks the notion that a 20 percent down payment is required to buy a home.
“Consumers need to know that there’s a great variety of mortgage products out there and many of them are designed specifically for first-time buyers,” says Liniger. “For example, FHA loans offering a 3.5 percent down payment have been around for many years and have traditionally been the mortgage of choice for first-time buyers.”
Surveys show that one of the most challenging obstacles to buying a home, especially for first-time buyers, is saving enough money for the down payment. In fact, saving for a 20 percent down payment on an average home could take an average wage earner many years. Most millennials believe that a 20 percent down payment is an absolute requirement and 73 percent of those 19-35 are unaware of low down payment mortgage options.
To help educate potential homebuyers, RE/MAX has also distributed an informational article posted on many newspaper websites that details four specific low down payment loan programs.
Government guaranteed loans by FHA, Fannie Mae and Freddie Mac can offer down payments as low as 3 percent, but borrowers do need good credit and verifiable income. Such mortgages may also require mortgage insurance if less than 20 percent is used as a down payment.
“Homebuyers should understand that a mortgage is like any other commodity they buy. They should shop around and find the one that suits them best. A loan officer or real estate agent can provide valuable guidance,” Liniger adds.
In today’s economic environment, first-time homebuyers, who tend to be younger, are often facing difficult financial realities, including student loan debt and slow wage growth. However, saving enough cash for a down payment on a home purchase should not prevent them from becoming homeowners. In many locations, rents are rising rapidly and a mortgage payment could be much less.