Using home equity

The type of home loan you get may determine how much of a down payment you need. For many years, buyers sought to put down 20 percent of the purchase price. That would lower their monthly mortgage payment and allow them to avoid having to pay for private mortgage insurance, or PMI. But as home prices have risen, that trend has waned. Loans that require as little as 3 percent up front have become more common. As a result, the median U.S. down payment has declined to 10 percent the past four years, according to the NAR.

“The housing market is not a matter of 20 percent down payment or bust,”

Saving for a down payment sometimes takes more than cutting back on dining out or travel. A quarter of firsttime homebuyers in 2016 used gift money from relatives or friends to round out their down payment, according to the NAR. And more than 10 percent tapped their retirement savings without the usual hefty penalties for an early withdrawal. Of course, before withdrawing money from your 401(k) or IRA accounts consider that a big withdrawal will mean your retirement savings won’t grow as swiftly.

Borrowers with low or moderate income, and teachers, firefighters or other public service job holders may also qualify for down payment assistance through thousands of federal, state or local programs aimed at helping homebuyers.

A newer approach to coming up with a down payment involves letting investors put up some of the money in exchange for a slice of the potential value in the home.

“There’s a very clear trade off here in that you are surrendering future equity,” said McBride. at comics .azcentral.com