The landscape of home buying has evolved significantly, and this is particularly evident when examining down payment trends in 2024. The median down payment on a home in the U.S. during the first quarter of 2024 was $26,700, which represents about 8% of the median home purchase price at that time. This figure highlights a shift from the traditional 20% down payment that many prospective homeowners believe is necessary. The minimum down payment required for a mortgage can vary greatly, depending on the home’s cost and the type of mortgage.
Despite the belief that a 20% down payment is standard, many mortgages today allow for much smaller initial investments. Some loans require as little as 3% or 3.5%, and certain loans, like VA and USDA loans, have no minimum down payment requirements at all. As of May 2024, the median down payment rose to $60,202, which is about 15.6% of the median home sales price of $384,375 for that month. These variations underscore the importance of understanding the different mortgage options and their respective down payment requirements.
The funding for down payments often comes from a variety of sources. Common methods include personal savings, financial gifts or assistance from family, borrowing from retirement accounts, or selling investments. It’s also important to consider that down payment amounts can vary significantly based on location and the buyer’s age group. For instance, younger buyers, typically aged 25-33, tend to make smaller down payments, averaging around 10%, whereas older buyers aged 59-68 may put down as much as 22%.
While a larger down payment can reduce the amount you need to borrow and potentially lower your interest rates, it’s not always feasible or necessary to aim for the traditional 20%. Smaller down payments can still facilitate homeownership and help buyers avoid the ongoing costs of renting. Moreover, putting down less and entering the housing market sooner allows buyers to start building equity and enjoying the benefits of homeownership earlier. Every situation is unique so please complete our home purchase qualifier on our website and we help you choose the down payment strategy that best fits your needs and goals.

For first-time homebuyers considering their mortgage options, a convertible adjustable-rate mortgage (ARM) offers a compelling combination of lower initial interest rates and monthly payments, along with the flexibility to switch to a fixed-rate mortgage later. This option can be particularly attractive for those seeking initial affordability. However, understanding the specifics of a convertible ARM is crucial to determine if it aligns with your financial needs.
A convertible ARM is an adjustable-rate mortgage that includes a conversion clause, allowing borrowers to switch from an adjustable rate to a fixed rate without refinancing. This option usually becomes available after an initial fixed-rate period of five, seven, or ten years. While there is a small fee associated with this conversion, it can result in more stable and predictable monthly payments for the remainder of the loan term. This stability is advantageous for those who benefit from lower initial rates but prefer the certainty of fixed payments over time.
The operation of a convertible ARM involves an initial fixed-rate period, followed by adjustments at predetermined intervals based on market rates. Unlike a traditional ARM, where the interest rate can fluctuate significantly, a convertible ARM offers the option to lock in a fixed rate upon conversion, typically higher than the initial adjustable rate. This conversion can be a strategic move to avoid the potential risks of rising interest rates and increased monthly payments associated with traditional ARMs.
Ultimately, the choice to opt for a convertible ARM depends on your financial goals and your ability to manage potential rate changes. While the initial lower rates and payments provide an immediate benefit, the flexibility to convert to a fixed-rate mortgage without refinancing offers long-term stability, we recommend that you schedule a consultation with us on our website and we can see what loan program fits your needs.

Mortgage rates have seen a decline across the board this week, providing a glimmer of hope for prospective homebuyers. According to the latest data, rates for 30-year fixed, 15-year fixed, 5/1 adjustable-rate mortgages (ARMs), and jumbo loans have all dropped. This slight decrease offers some relief amidst the continuing challenges of high prices and elevated interest rates. Despite inflation cooling somewhat, homebuyers still face significant hurdles in the current market environment.

The Federal Reserve’s recent decision to hold off on changing interest rates at their June 12 meeting highlights the ongoing uncertainty in economic policy. The Fed’s stance of maintaining higher interest rates for an extended period appears increasingly untenable as consumer spending pulls back and economic indicators suggest potential rising unemployment. As the economic landscape evolves, there is speculation that a rate cut could be on the horizon, potentially as soon as later this year. This anticipation adds another layer of complexity for those trying to navigate the housing market.

Deciding to buy a home often transcends economic conditions and is deeply personal. For some, taking on a higher mortgage rate now with plans to refinance later might be a strategic move. This approach allows buyers to start building equity immediately rather than waiting for a potentially more favorable market. While today’s 30-year mortgage rate at 7.05% is slightly lower than last week’s 7.06%, it still means higher monthly payments. However, locking in a rate and starting the journey toward homeownership could outweigh the uncertainties of future market conditions.

If you’re seeking financing for a home over a million dollars, chances are you have heard these options: jumbo loans and conventional loans. A conventional loan, typically offered by private lenders, is what most people think of when considering a mortgage — a fixed interest rate loan covering most of a home’s purchase price. While a jumbo loan technically falls under the conventional loan category, it is distinct in several key ways, particularly in the amount of money it allows you to borrow.

What Defines Jumbo and Conventional Loans?

A conventional loan is not backed by the federal government but instead originated, financed, and guaranteed by private lenders. These loans can be either conforming or nonconforming. Conforming loans meet the Federal Housing Finance Agency (FHFA) requirements, including loan size limits that vary by state and county. For 2024, the conforming loan limit is $766,550 in most areas, rising to $1,149,825 in high-cost areas. Conforming loans can be bought by Fannie Mae and Freddie Mac, reducing lenders’ risk. Jumbo loans, on the other hand, are nonconforming due to their size. They are necessary for purchasing high-priced homes exceeding conforming loan limits, allowing borrowers to secure larger amounts — often up to $3 million or more.

Comparing Jumbo and Conforming Loans

Though both jumbo and conforming loans are conventional, they have significant differences. Jumbo loans require a higher credit score (minimum 700) compared to conforming loans (minimum 620). The down payment for jumbo loans is also larger, typically 20-25%, while conforming loans may require as little as 3-5%. Debt-to-income (DTI) ratios for jumbo loans are stricter, and borrowers need substantial cash reserves, sometimes up to 12 months’ worth. Interest rates on jumbo loans are generally higher due to the increased risk to lenders, although competitive rates are still available, influenced by broader economic factors and individual financial profiles.

Choosing the Right Loan for You

Deciding between a jumbo and a conventional loan depends on your financial situation and home-buying goals. Jumbo loans are ideal for purchasing luxury homes or properties in high-cost areas, especially if you have a high income, excellent credit, and can afford a significant down payment. Conforming loans are better suited for moderate-priced homes within local loan limits, particularly if you have a lower income, less savings, and need a smaller down payment. Of course feel free to schedule a consultation with us on our website and we can help review the differences and requirements of each loan type will help you make an informed decision tailored to your specific needs.