Top 5 Down Payment Myths Debunked

June 9, 2021 | by Guest Posts

Categories: First Time Buyer, Homeownership

This is a guest post by Down Payment Resource, the nation's only database of home buyer programs.  Mark your calendar for June 11th when we release our next podcast episode discussing each of these topics in depth. 

Purchasing a home is one of the most important financial decisions you’ll ever make, and the biggest hurdle for most buyers is the down payment. The good news is that help is available, and you may be able to purchase a home much sooner than you think. 

Let’s break down some common down payment myths, so you can make a more informed decision when it comes to financing your new home.

Down Payment Myth #1: I need 20 percent down to buy a home.

According to the 2020 Nerdwallet Home Buyer Report, 62 percent of homebuyers believe they need a down payment of 20 percent or more to purchase a home. That’s simply not true. The average first-time homebuyer puts only 6 percent down, and many loan programs allow for as little as 3 percent or even zero down. 

One example is TSAHC’s Home Sweet Texas Home Loan Program — a 30-year fixed interest rate mortgage, with 5 percent of the loan amount available for down payment assistance. This program has little out of pocket expense for the homebuyer. Even better, the down payment assistance may be in the form of a grant, which does not have to be repaid. This way, you can retain your savings for after-closing expenses such as new home furnishings or possible repairs.

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

Did you know that the official HUD definition of a first-time homebuyer is someone who has not owned a home in three years? If you’ve owned a home in the past, but have been renting for 4 years or more, guess what? You’re a first-time homebuyer!

And even if you’re not a first-time buyer, there are down payment programs available for repeat buyers as well. Our recent Homeownership Program Index revealed nearly 38 percent of programs in our nationwide database did not have a first-time homebuyer requirement.

Many homeownership programs will also waive the first-time homebuyer requirement for Veterans. The same goes for homebuyers purchasing in designated target areas. Buying a home in a designated area may mean additional benefits such as higher assistance amounts, more lenient income requirements, and no first-time homebuyer requirement. 

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

Down payment programs are available in every market across the country, and more than 81 percent of all programs currently have funds available for homebuyers.

Texas is one of the top 3 states when it comes to offering the most program options. For example, addition to their mortgage loans, down payment assistance grants and second liens, TSAHC also offers a Mortgage Credit Certificate. This mortgage interest tax credit, which is the only TSAHC assistance option reserved for first-time home buyers, saves you money by lowering your federal income tax bill every year that you live in your home.

There are also homeownership programs available through local municipalities and nonprofits. Check out our search tool to determine which programs are available in your area, and whether or not you may be eligible.

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

As we mentioned above, down payment help is available in every market, including high cost areas. The sales price requirements for programs are typically set based on a percentage of the area median home price. This means the home price limit in Texas can go from $300,000 up to over $400,000 in certain high cost markets.

Many programs even offer special incentives for community service employees, including educators, police officers, firefighters, and healthcare workers. These programs are especially beneficial in high cost areas, as they encourage employees to live in the community they serve.

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

There are a lot of moving parts to the homebuying process, which means there are several things that may cause delays. A down payment program doesn’t have to be one of them.

The best thing you can do is be prepared, and a homeownership education course is a good place to start. Many down payment programs require homebuyer education, especially for first-time buyers. This education course builds confidence in the home buying process by reviewing credit and financing options, budgeting techniques and more. 

The bottom line.

Explore your home financing options early, and start building a personal homebuying team. Housing agencies, real estate agents, and participating lenders can provide expert guidance and get you on the path to homeownership.

Looking for down payment help? Complete the TSAHC four-step eligibility quiz to see if you meet their qualifications. You can also search for additional program options in Texas, or across the country.

On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.


Rebecca DeLeon

This was a great reference and an easy read too.  Thank you. rd

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