Buying a home is one of the biggest investments you will likely make in your life, so it’s important to know exactly what it takes if you’re a first-time buyer. Many homebuyers, however, still lack an understanding of the home buying basics, like down payment options and when to begin saving. Of course, how much you should save and when you should begin saving will depend on several factors, like whether you’re buying as a single or married couple and where you are looking to purchase. No matter which type of homebuyer you are, this is what you need to know about saving for a down payment.
On average, saving for a down payment as a single will require more money saved and more years to save it. According to Zillow, to purchase a median-priced home (on a national scale), a single homebuyer will need to save for six years longer than a married couple. For many, it could take up to 11 years in order to make a 20 percent down payment. Throughout these 11 years, he or she would need to save 10 percent of their annual income.
The home search process could also be slightly more competitive for single buyers, as housing inventory dropped 11 percent throughout 2017. Of the available homes for sale, Zillow economist Aaron Terrazas reported that singles have typically been able to afford less than half of them. This does not, however, mean buying a home as a single is impossible (or close to it)! According to the National Association of Realtors’ 2017 Home Buyer and Seller Generational Trends, 24 percent of homebuyers were single. In fact, single women have become the second largest group of buyers in the market.
Although competition is slightly lower for married and couple homebuyers, it is still important to save for a down payment. Usually, couples save for less than 5 years in order to put 20 percent down. With two salaries contributing to the mortgage, couples may also be able to afford a wider range of properties. As a result, Terrazas finds that couples can afford 85 percent of available inventory.
Of course, it’s important to remember that you do NOT have to make a down payment of 20 percent when buying a home. Many programs are (and have been) available for borrowers of several financial backgrounds. More specifically, the FHA has backed mortgages with down payments of 5 percent or less since the 1980s. Conventional loans, or home loans not backed by the government, have offered low down payment options since the 1990s. In other words, with a variety of low down payment programs, getting a mortgage may be more affordable than you think - whether you are single or married!
For more information about saving for a down payment as a single or couple, contact one of our mortgage specialists today.
