Most Would-Be Home Buyers Are Wrong About the Down Payment They'll Need

Don't make this mistake when it comes to planning your home purchase.

Buying a home can be a complicated process. Unfortunately, many people have some misconceptions about what is required when it comes to home ownership.

Specifically, new data from the National Association of Realtors revealed most people are confused about what kind of down payment would be required to purchase a home.

The NAR study found that consumers typically believe they'll need a median down payment of 20% of the home's value in order to be able to purchase a property. And as many as 35% of people believe they'd have to come up with 16% to 20% of their home's value to use as a down payment.

If you've been thinking that now may be a good time to buy a home, don't get caught up in the mistaken belief that you need a large down payment to own a home. Here's what you need to know.

What down payment do you really need to buy a home?

First things first: Putting 20% down on a home is definitely the best move if you can make it happen. A 20% down payment:

• Gives you the broadest choice of mortgage lenders
• Helps you to get a better mortgage rate because lenders view loans with larger down payments as less risky
• Allows you to avoid paying private mortgage insurance, which is insurance you pay as part of your monthly costs, even though it only protects the lender (not you) from losses in case of foreclosure
• Helps ensure you don't wind up with a mortgage that exceeds your home's value, which could create huge problems if you want to refinance or sell your property

But while a 20% down payment is ideal, it is generally not required.

The reality is, many conventional lenders will allow you to buy a home with way less money down -- sometimes as low as 3% (although 10% is more common). And some government-backed loans will even let you buy a home with zero down payment.

For more information on getting a mortgage with minimum down payment requirements, check out the following resources:

• FHA loan
• USDA loan
• VA loan
• Down payment assistance

Should you put down less than 20%?

Although putting 20% down is the best move if you can swing it, for some people that would be difficult or even impossible -- especially in a high-cost-of-living area. If it would take you 20 years to save up a 20% down payment, it makes little sense to continue renting for most of your adult life just because the down payment requirements are difficult for you to fulfill.

If you are 100% confident you can afford mortgage payments, can get approved for a loan at a good rate, and are otherwise financially ready to buy a home but don't have 20% to put down, then don't let a misapprehension about your down payment requirements prevent you from moving forward. Start looking for the right home for you so you can begin reaping all of the advantages that can come with owning your own place.