Top 5 Down Payment Myths Debunked

Top 5 down payment myths debunked

More markets are looking at affordable housing strategies to attract and retain important services.

Down Payment Resource, the nationwide database for homebuyer programs, released its Fourth Quarter 2019 Homeownership Program Index (HPI). The latest HPI data debunks five common down payment myths that may be keeping buyers on the sidelines longer than necessary.

Myth #1 - You need 20% down to buy a home.

A survey found that 41% of people believe a high down payment is required to purchase a home. In fact, there are many low down payment loans and programs available. New data shows that a lower down payment may even be better for many new buyers, as it provides a valuable cash cushion. Research by the JPMorgan Chase Institute found that liquidity — having at least three months of mortgage payments available — is a better measure of homeownership success than a large down payment. 

There are a wide range of homeownership programs that can help with the down payment and closing costs.

Myth #2: Down payment help is only for first-time homebuyers.


The industry often associates homeownership programs with first-time homebuyers, but eligibility is actually broader. The official definition of a first-time homebuyer — according to HUD — is someone who hasn't owned a home in the last three years. In addition, the HPI reports that 41% of homeownership programs do not have a first-time homebuyer requirement and are available for eligible repeat homebuyers.

Myth #3: Down payment programs aren’t available in my area.

Down payment programs are available in every market across the country. The HPI reports 70% of programs are available in a specific local area, such as a city, county or neighborhood and nearly 30% of programs are available state-wide through state housing finance agencies — a 2% increase from the previous HPI. States with the greatest number of down payment programs remained consistent —California, Florida and Texas are the top three.

View a complete list of state-by-state program data.

Myth #4: It’s too expensive to buy a home in my market.

Down payment help is available in every market, including high cost areas. The HPI reports that 11% of programs offer incentives and even specific programs for community service workers, including educators, police officers, firefighters and healthcare workers — a 3% increase from the previous HPI.

Plus, more than 6% (6.3%) of programs have benefits for veterans, members of the military and surviving spouses. These programs can also be layered with zero down payment VA loans.

One-to-four unit multi-family properties can also qualify for down payment help. 25% percent of programs allow buyers to purchase a multi-family property as long as the buyer occupies one of the units, which allows the homeowner to earn income from their rental units to help pay the mortgage.

Myth #5: Down payment programs make home financing more difficult.

There are 2,451 homeownership programs available in the nation and 83% currently have funds available to eligible homebuyers. Exploring home financing options should be the first step for prospective buyers, however, they don’t have to go it alone — housing agencies, program administrators and participating lenders can provide expert guidance.

Homebuyers can get a jump start by completing the homeownership education course typically required to qualify for a program. This education is usually free, online and gives buyers confidence with the home buying process, financing options and budgeting. Homebuyers should refer to the specific requirements and education providers as specified by the program.

After a homebuyer is approved for a program, the agency will provide documentation that can be submitted with an offer. Sellers can also benefit because the down payment program may help cover closing costs.

Let's see what your eligibility is TODAY! 

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