Homebuyers still have down payment misconceptions....

For many people in Phoenix thinking about buying their first home, the idea of needing a full 20 percent down payment feels almost impossible. Between rising rent prices, higher living costs, and student loans, saving up tens of thousands of dollars can feel like a never-ending and overwhelming financial goal that keeps getting further out of reach.

We hear this concern every single week at Andrea Garcia Realty from buyers across the Valley, from young professionals to growing families. Buyers tell us they’re waiting to purchase a home until they can save up that “magic” 20 percent, thinking it’s the only way to buy a house without making a financial mistake. But here’s what you need to know: that belief is one of the biggest myths holding people back from homeownership today, and in many cases, it’s costing buyers far more money in the long run than they realize.

Where Did the 20 Percent Myth Come From?

The idea of needing a 20 percent down payment goes back decades. Traditionally, buyers put down 20 percent to avoid paying private mortgage insurance (PMI), which protects the lender in case the borrower defaults. Avoiding PMI does lower your monthly mortgage payment, which is why this idea stuck around for so long.

But what many people don’t realize is that housing prices and incomes have changed drastically over the past 20-30 years. Saving 20 percent in today’s market could take buyers an extra 5-10 years, especially as Phoenix home prices continue to appreciate. During that time, buyers are paying rent and missing out on building their own equity.

The Real Numbers Today

According to the National Association of Realtors, the average down payment for first-time buyers is only 8 percent, and for repeat buyers, it’s about 19 percent. This shows that most people are not putting down a full 20 percent, even if they could.

Why? Because putting less down allows buyers to enter the market sooner, start paying themselves instead of their landlord, and begin building wealth through equity growth.

What Happens If You Don’t Put Down 20 Percent?

If you put down less than 20 percent, you will typically pay PMI. For conventional loans, PMI usually ranges from 0.3 percent to 1.5 percent of the original loan amount per year, depending on your credit score and down payment size. While no one loves extra fees, the monthly PMI cost is often far smaller than the extra home price appreciation you gain by entering the market earlier.

The good news is that PMI on conventional loans can be removed once you reach 20 percent equity through payments or appreciation. FHA loans require mortgage insurance premiums (MIP) for the life of the loan if you put down less than 10 percent, but refinancing later can remove this.

Your Realistic Options for Buying with a Low Down Payment

Here are the main ways buyers in Phoenix are getting into homes with less than 20 percent down:

• Conventional Loans with 3-5 Percent Down

Many lenders offer conventional loans with as little as 3 percent down for first-time buyers or low-to-moderate income buyers. These loans have competitive interest rates and manageable PMI, especially if your credit is strong.

• FHA Loans with 3.5 Percent Down

FHA loans are backed by the government and allow buyers with lower credit scores to qualify with just 3.5 percent down. This is a popular option for buyers who may not meet stricter conventional loan requirements.

• VA Loans with Zero Down

Veterans, active duty military, and eligible surviving spouses can qualify for VA loans with zero down payment and no PMI. This is one of the best benefits available to those who have served.

• USDA Loans with Zero Down

For buyers purchasing in eligible rural or suburban areas, USDA loans allow zero down payments if income and location qualifications are met. Certain outskirts of Phoenix and Maricopa County may qualify depending on the area.

• Down Payment Assistance Programs

Arizona offers down payment assistance programs, such as Home Plus, which provide grant funds or second loans to cover part of your down payment and closing costs. These programs have specific income, credit, and purchase price guidelines, but they can bridge the gap if you’re close to qualifying.

• The Cost of Waiting to Save 20 Percent

Here’s the reality we see often: buyers who wait years to save a full 20 percent down end up paying significantly more for their home later. While they’re saving, home prices continue to rise, interest rates can increase, and they continue paying rent without building equity. In many cases, paying PMI for a few years costs far less than the additional price appreciation they would face by waiting.

For example, if a $400,000 home appreciates just 5 percent per year, in two years, it could cost over $440,000. That’s a $40,000 increase just to avoid paying PMI, which may have cost a few hundred dollars per month in the meantime.

The Bottom Line from Andrea Garcia Realty

Don’t let outdated beliefs about down payments hold you back from becoming a homeowner. Every buyer’s situation is unique, but what matters most is having accurate information to make the best decision for your goals and finances today.

If you’re wondering how much you really need to buy a home in Phoenix, reach out to our team. We can connect you with trusted local lenders who will review your income, credit, and goals to show you exactly what programs you qualify for. You might be surprised to learn that your dream of homeownership is closer than you think.

Ready to take the first step? Contact us today to talk through your options and start planning your path to owning a home in the Valley.