Debunking the 20% Down Payment Myth: Why Waiting Could Cost You in Raleigh
One of the biggest misconceptions about buying a home in the Raleigh area is the belief that you must have a 20% down payment. While this sounds like a responsible strategy, waiting to save that much could cost you more in the long run.
The Truth About the 20% Down Rule
The idea of putting 20% down is mainly to avoid Private Mortgage Insurance (PMI)—a monthly fee added to your mortgage payment when your down payment is less than 20%.
While avoiding PMI might seem like a good financial move, the reality is that PMI is often a small price to pay compared to the benefits of homeownership and the risks of delaying your purchase in Raleigh’s competitive housing market.
The Cost of Waiting: A Real-World Example
Consider this scenario:
- You find a home in Raleigh priced at $500,000, but you only have 5% saved ($25,000).
- You take on PMI, which adds about $193 per month to your mortgage payment.
- Instead of buying now, you decide to wait and save the full $100,000 needed for a 20% down payment.
Fast Forward 6 Years…
- That same home has appreciated and is now worth $609,000.
- Even with your $100,000 savings, you’re now only putting 16% down, which still requires PMI.
- Worse yet, you missed out on six years of home equity, appreciation, and financial growth.
Why Time in the Market Beats Timing the Market
The Raleigh real estate market has shown strong appreciation year after year. Waiting to save a larger down payment can mean:
- Higher home prices
- Lost equity growth
- Potentially higher mortgage interest rates
- Increased competition as affordability decreases
Meanwhile, homebuyers who enter the market earlier start building wealth simply by owning their home.
The Smarter Strategy: Buy When You’re Ready
Most first-time homebuyers don’t put 20% down. Many take advantage of low-down-payment loan options, including:
- FHA loans (as low as 3.5% down)
- Conventional loans (as low as 3% down)
- VA and USDA loans (0% down for eligible borrowers in Raleigh and surrounding areas)
Rather than waiting for the “perfect” down payment amount, consider whether you:
- Have enough saved for a small down payment
- Have a stable income and financial security
- Are ready to invest in Raleigh homeownership
Bottom Line: PMI is a Temporary Cost, Not a Dealbreaker
PMI is a small short-term expense that allows you to enter the market sooner. As your home value increases or as you pay down your loan, you can request to remove PMI—it’s not forever.
What Should You Do Next?
✅ Stop waiting for the “perfect” 20% down payment
✅ Explore low-down-payment mortgage options in Raleigh
✅ Understand how appreciation builds wealth over time
If you’re ready to take the next step or just want to explore your options, let’s talk! The home you’ve been dreaming about in Raleigh may be more within reach than you think.
