Coming up with a down payment for a home purchase is oftentimes one of the biggest challenges faced by buyers. While move-up buyers can use the money from selling their current home, first-time buyers are forced to save this money from scratch. Fortunately, there are various loan types and options that may provide some flexibility in the amount of the down payment.
Private mortgage insurance (PMI)
Private mortgage insurance (a.k.a. PMI), is a type of mortgage insurance you might be required to pay for if you have a conventional loan. Like other kinds of mortgage insurance, PMI protects the lender if you stop making payments on your loan. PMI is typically required if you have a conventional loan and make a down payment of less than 20% of the home’s purchase price. If you are refinancing a conventional loan and have less than 20% equity in the home, you will also be forced to pay PMI. Typically, the PMI premium is added to your monthly mortgage payment. In some cases, you may also be able to pay for PMI as an up-front premium at closing as well.
Average down payment
In this market, the average down payment put on a home purchase is around 6%. Of course, these buyers are also required to pay PMI as well. As expected, with home prices rising rapidly we are also seeing this reflected in down payments as well. According to newly released numbers from ATTOM Data Solutions, the median down payment is now at its highest level in more than 15 years. In fact, during the third quarter of 2021, the median down payment on a single-family home reached $27,500. This figure is up from $26,000 during the second quarter of 2021 and $19,502 during the third quarter of 2020.
The average amount of a down payment on a home purchase will vary based on what part of the country you are in. In South Florida, we have seen an increase in buyers relocating from more expensive markets such as New York, New Jersey, and others. With this said, we also tend to see an increased percentage of cash buyers as well. Needless to say, this has made the housing market considerably more competitive throughout South Florida. For buyers that are obtaining a conventional loan, it is important to maximize your savings in order to put the strongest down payment possible.
At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. Live South Florida Realty, Inc., has been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our recently launched “Florida Home Search” app is now available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!