Though 20 percent is the benchmark for a down-payment, it is not an ironclad requirement.
NerdWallet reports that 54 percent of buyers, and 70 percent of non-cash first-timer buyers, made down-payments of less than 20 percent during the last five years, according to a report from the NAR. The majority of first-timers made down-payments of 6 percent or less.
Of course, the 20 percent down-payment has its advantages. Buyers won’t need mortgage insurance, and they’ll earn a lower mortgage interest rate. Monthly payments will be lower. But, it’s not worth it for a buyer to deplete an entire savings account to make a 20 percent down-payment. That could be money spent on taxes, closing costs, or home improvements.
The “traditional” 20% down payment may become obsolete, even among big lenders. Brian Moynihan, CEO of Bank of America, told CNBC in May that lowering the down payment requirement from 20% to 10% “wouldn’t introduce that much risk but would help a lot of mortgages get done.”