Downing Frye Realty Inc.
Molly Eovino, Downing Frye Realty Inc.Phone: (239) 537-5100
Email: [email protected]

How Much of A Down Payment Do You Need To Buy a Home?

by Molly Eovino 12/01/2019

We all know that buying a home is a significant decision that comes with a great deal of financial planning and preparation. However, few of us are taught the ins and outs of actually obtaining a mortgage to make your dream of homeownership come true.

Mortgages are a complicated business that is always changing, both with fluctuations in market rates and with policy decisions.

But, if you’re hoping to buy a home in the near future, it’s important to understand all of your options when it comes to mortgages.

In today’s post, we’re going to address the 20% down payment myth, where that number comes from, and what your options are when it comes to applying for a mortgage.

Where does the 20% down payment number come from?

For most people, 20% of a house is a serious amount of money that would take years to save up. If you’re a first-time homebuyer and don’t have any equity to use from selling another house, 20% may seem like an impossible amount to save within the time you want to buy a home. Fortunately, there are several ways to buy a home without having 20% in cash saved up.

But first, let’s understand where that number comes from.

Most mortgage lenders will want to ensure that lending to you is a safe investment of their money. They want to know that they’ll earn back what they’re spending. To do this, they use several methods.

First, they’ll check your credit history to see how often you pay your bills in time. Then, they’ll want proof if your income and financial stability. Finally, they’ll ask for either a down payment or a guarantee that you will pay them back. Here’s where that 20% comes in.

If you don’t have 20% of the mortgage amount saved for a down payment, you will typically have to pay something called private mortgage insurance. This is an extra monthly fee, on top of your mortgage payments with interest, that you pay to ensure the lender that they’re seeing a return on their investment.

Most homeowners put much less than 20% down

If you’re feeling bad about the amount of money you have saved for a down payment, don’t be! In fact, most first-time homebuyers put, on average, just 6% down on their first home.

Since first-time homeowners don’t have the benefit of equity they’ve accumulated by making payments on their previous mortgage, they often have to come up with down payments out of pocket.

Other options besides a 20% down payment

There are several ways to secure a mortgage without putting 20% down on the home. First, check to see if you are eligible for any loans that are guaranteed by the government. These can come from the Department of Veterans Affairs (VA), or the USDA single-family home program.

The third option is to take on private mortgage insurance until you’ve paid 20% of your mortgage payment.

Private mortgage insurance can be paid to an insurance company or to the federal government in the case of FHA loans, you can put down as low as 3.5%.


Between these three options, you should be able to find a mortgage that you can afford and one that will give you the best possible financial stability in the long-term.

About the Author
Author

Molly Eovino

Except for a short time, I was a permanent resident in Cedar Rapids, Iowa. The heart of the Midwest!  I visited Naples for 30 years, as my parents lived here, watching the community grow from a fishing village to a destination in SW Florida. When my last college bound child hit the University of Iowa in 2001, I hit the road!

I brought with me over a decade of experience in Real Estate, excellent education, and a broad range of interests to jump into the Naples scene with gusto! I "speak" golf and tennis, theater and location/mapping!

In Naples, you will find that nearly everyone is from somewhere else! As a result, your friendships will span the nation and globe, with immediate contacts in England, Germany, France, the East Coast, and the Midwest! Once visitors have experienced Naples, they want to call it home, and then "visit" where they originate from! I am no different, and have tried to learn as much about the town and all it´s history and activities to feel like a native!

I promise you a city tour to help you fall in love with the flavor of Southwest Florida, from the lure of the beaches, morning and sunset, to the different types of golf (equity or bundled). May I interest you in the gourmet flavors that abound, from food to entertainment?

As an active community volunteer in Iowa, I worked on Junior League fundraising events, the Cancer Crusade, March of Dimes, and Kidney foundation drives, and was extremely active in the school committees involving sports (football,basketball, track); cheerleading; and 4 years of show choir productions, Concert Choir, and Madrigal Singers!

Naples has already found a nitch for me in the Naples Players Theater, where I volunteer as a backstage dresser to advance their enthusiastic cause!  I just haven´t gotten on stage...  Growing up in a musical environment,Broadway shows in Naples keep me humming.

The Naples Children & Education Foundation draws my heartfelt attention& volunteer hours  from summer months to the annual Naples Winter Wine Festival in late January.  Their mission statement "supports effective, disciplined charitable programs that significantly improve the physical, emotional and educational lives of underprivileged and at-riskchildren in Collier County, Florida".  As a non-profit organization,the wine festival raised nearly $12 million during the 2019 event! From helping with mailings, to what I call the "quilting table of many hands" for events, I've met many like-minded friends, who believe it's all about the kids!

My educational background spans a multitude of areas, but now they all concentrate on improving my real estate performance. It includes:
BA degrees in Psychology & Vocational Rehabilitation from the University of Northern Colorado.
Mediation Seminars for the Iowa Farmer-Creditor Mediation Services.
Real Estate License in Iowa, REALTOR® 1988
Graduate of the Realtor´s Institute (GRI) 1992
Certified Residential Specialist (CRS) 1994
Accredited Buyer Representative (ABR) 1999-2018
Licensed Broker-Associate, Florida, 2001
Certified Distressed Property Expert (CDPE) 2009
Certified Investor Agent Specialist (CIAS) 2012
Resort & Second Home Property Specialist (RSPS) 2016

As you can tell by my "personal resume", we will become friends as well as business associates. I enjoy teaching my customers Real Estate-ese so that you can make an educated decision regarding your first or second home, or your new rental property. The market in Naples is excellent, and truly is a beautiful Paradise! With year-round tropical temperatures and deep blue skies, I hope that you will agree that I provide

"Midwest warmth in the Naples sunshine"!