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How Much Do You Need For A Downpayment?
Dated: March 13 2020
When it comes to how long it takes homebuyers to save up for a down payment on their first home, older generations were typically able to do so faster. Of those who were able to save in under 10 years, BabyBoomers took an estimated average of 2 years 6 months while Gen Xers needed 2 years 9 months and Millennials needed 3 years. Gen Xers were the most likely to say it took them more than 10 years to save for their down payment (6% vs. 2% of Millennials and 4% of Baby Boomers).Those still looking to make the homebuying leap fear it will now take them longer than that. For those prospective homebuyers who believe they can save up their down payment within 10 years, they need an estimated 3 years and 10 months, on average. Still, more than 1 in 10 (11%) prospective homebuyers think it will take more than 10 years to save and nearly 1 in 3 (32%) don’t think they’ll ever be able to get there. The likelihood to feel saving enough is impossible increases with age: 22% of Millennials say they don’t ever think they’ll be able to save enough for a down payment while 37% of Gen Xers and 60% of Baby Boomers feel the same way. “Part of determining how long it will take you to save for a down payment comes down to figuring out how much house you can afford, including the mortgage payment, property taxes, homeowners insurance, homeowners association fees and mortgage insurance,” Kearns says. She adds there are a myriad of costs associated with homeownership that you need to include in your budget, such as maintenance and repairs, as well as the time involved in keeping up a home or hiring tasks out to professionals. When asked about the minimum required down payment needed to buy a home, 51% of all Americans couldn’t guess, responding they “don’t know” the answer. Another 1 in 4 (28%) said that the standard recommended amount of 20% or more of the purchase price is required. Just 2% guessed the standard minimum requirement which is between 0 and 5% of the purchase price, depending on the loan program. Responses were fairly universal across all generations, which may indicate that consumers generally aren’t fully aware of the numerous loan programs that provide an affordable entry into homeownership. When it comes to determining your down payment amount, Kearns explains, “Twenty percent of the purchase price has long been the recommended amount, however, many homebuyers don’t realize that conventional loans require just 3% of the purchase price as a down payment and some VA and USDA loans don’t require anything at all. Local first-time homebuyer assistance programs can also lower your upfront, out-of-pocket costs substantially at closing.” Methodology:Bankrate commissioned You Gov Plc to conduct the survey. All figures, unless otherwise stated, are from You Gov Plc. Total sample size was 2582 adults. Fieldwork was undertaken between 31st July - 2nd August
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