edit: Wow, I'm probably pretty wrong about this. 3% loans are really quite affordable. Why aren't more people buying homes? Being a renter is total hell
No.
FHA loans can be 3.5% down ($14k on a $400k loan) and closing costs can often be financed (most of them, but usually not all).
There are also first-time buyer programs and other specialized lending options like VA (if you served/active), etc.
It’s also not always a good idea to start with an SFD where you are responsible for everything (roof, plumbing, etc). It’s easier to do a condo first and get the hang of it/build some equity. If you can do SFD in a given area for $400k, condos are likely half that or cheaper. Beats renting unless you need the ability to move quickly as selling can take a bit of waiting (unless market turns, and then you could be waiting a few years or have to sell at a loss).
There are other ways to help craft an offer that could be stronger, including offering better other terms (usually not just the offering price).
Aside from having to move if the owner sells, it’s pretty nice not have to think about maintaining the house.
Here in the sf bay (Marin sfh with two kids) our landlords just decided to sell. It’s been stressful, but we found a place that we like better for about the same rent.
The owners offered the place to us at a reasonable price, but our monthly payments would have been about double what we pay now, and we would have had to put 20% down. Prices have gone up 40% since we last moved three years ago but rents haven’t budged.
The bigger factor sellers look at is how much money you offer them. At 20% on a conventional, you may be able to get your lender to wave the appraisal requirement, which would be a help if you try offering much over the list price (unless you also have the cash to make up the difference, which if you need the 3% down payment, you probably dont).
Let me give an example to explain why they see it and why it's important. let's say that the agreed contract says that the buyer and seller agree to pay $600,000 for the house. Let's pretend that you have 10% down or $60,000 down. You need a loan for $540,000
The loan requires an appraisal to make sure that the bank (the loan) is a safe investment. The bank/loan only agrees to lend you the amount the house appraises at.
Back to the example and the appraiser comes out and says that the house is worth $500,000. In this case, again the signed offer says $600,000 with a $60,000 deposit.
The buyer either has to bring $100,000 to the table or the seller has to agree to make less money than the original offer (or some combination of the two) , but the bank will only give $500,000.
So if a buyer had a $100,000 downpayment and offered $600,000 and a second buyer offered $600,000 as well but only had $60,000, the seller would most likely choose the offer with more money down. it would be more likely to close.
Hope that helps
And in warm markets (for get about hot markets like NY and SF), even an offer with 20% down is not pleasing to the seller. 20% or less down means that if the bank under appriases for whatever reason would cause a massive delay and/or cause the deal to fail.
For the buyer, many costs at this point or unrecoverable. Inspecting, lawyers, etc. This is a huge hit to a low income person.
In a warm/hot market, anyone with a mortgage is going to lose to someone with cash, so not really an issue.
Anecdotally from friends buying their first homes, very few to zero of them put down anywhere near 20%.