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Down Payments in Today’s Market

Hand holding a house key

Down payments have always been a big part of the home buying conversation, and for good reason. Your down payment is an important part of your lender’s research, and the higher your down payment, the less your principal balance on the home will be. In addition, a down payment of less than 20% of the purchase price means that you will likely need to pay private mortgage insurance (PMI) to secure a mortgage for your home. With today’s rapidly changing housing market, it’s important to stay informed about how down payment needs have changed. Here are some things to keep in mind about your down payment in today’s market.

The Average Down Payment is Still Less Than 20%
The National Association of Realtors found that the average down payment on a home was 12% of the purchase price, and even less for millennial home buyers. For home buyers under 30, the average down payment was 6% of the purchase price. While a 20% down payment is always advisable if you can swing it, the majority of buyers don’t get there. Instead, buyers are utilizing mortgage products that require less than 20% down, some with as little as zero down for certain circumstances.

Many Buyers Utilize Private Mortgage Insurance
When you put less than 20% down on a home, your equity is less than 80% of the home value. In most cases, lenders will require private mortgage insurance (PMI) in order to provide a loan. PMI is an added cost to your mortgage to protect your lender should you default on the loan and is generally .05-1% of your total loan amount, or between $30-$70 per month for every $100,000 borrowed. The good news is, it doesn’t last forever. PMI goes away after you reach 80% equity in the home.

Be Sure to Plan Ahead
For most home buyers, saving for a down payment on a home takes budgeting, paying down debt and increasing income, but if you’re struggling to come up with funds for a down payment, you’re not alone. In North Carolina, it takes the average household 4-5 years to save up enough for a 20% down payment on a home, and the amount of time you need depends on many factors like the cost of the home, your income and other costs. Planning ahead to save up for a down payment, regardless of how much you choose to put down, is one of the first steps toward home ownership. Learn more about how to save up for a down payment in a way that fits your budget.

The NC Housing Finance Agency Can Help
If you want to buy a home but need help surmounting the down payment hurdle, the NC Housing Finance Agency has resources that can help, including down payment assistance with the NC Home Advantage Mortgage™ and $8,000 in down payment help through the NC 1st Home Advantage Down Payment. Buyers can use this down payment to buy their home or to give existing down payment savings a boost.

In addition to down payment assistance and affordable mortgages, the NC Housing Finance Agency also provides down payment and mortgage financing in partnership with local government and nonprofit partners through community programs, known as the Community Partners Loan Pool and the Self-Help Loan Pool. The programs can help make home purchases more affordable for home buyers with low and moderate incomes.

Learn more about all the ways the NC Housing Finance Agency can help make buying a home affordable for you at