Who puts 20% down on a house? Not nearly as many as you might think

[Note by Jennifer Karmon, editor of Yahoo! Homes: I was recently surprised to learn from LendingTree that despite conventional wisdom, most people don't put 20 percent down when they buy a home. I talked to a financial writer I know, Michelle Stoffel Huffman, who told me she's been shocked to learn the same thing firsthand -- so I asked her to write this guest post about her experience. She researches and writes for the Equifax Finance Blog and other outlets, specializing in real estate industry news, consumer financial reporting, and home design and decor.]

I write about real estate for a living. I've talked to the experts. I've read the advice. Everyone who knows anything has told me that the most financially sound option when you're buying a house is to put 20 percent down.

Yet many people aren’t putting 20 percent down on new home purchases. In fact, the average down payment has fallen to just 16 percent nationwide, having dropped a whopping 9.4 percent since May 2011, according to LendingTree, an online marketplace for loans.

In some states, the average is even lower: In Mississippi, Kansas and Wisconsin, the average hovers between 12 and 14 percent. Granted, there are a few states like California and New York where 19 or 20 percent are the norm, but that doesn’t mean you can’t get a loan putting down less.

At first, the only thing that these data said to me was that a lot of people are doing it wrong.

In my own life, my husband and I have been pinching pennies and tightening purse strings to save up that 20 percent for our first home, and so far we’re only halfway there.

But after seeing these data, I decided it might be time to talk in more depth to lenders.

What they said shocked me:

Not only is it unnecessary to put 20 percent down -- if you do put 20 percent down, you may actually wind up paying more for your home in the long run.

Saving for 20 percent could cost thousands

Our lenders assured us we could get a loan with 10 percent down or, in some rare cases, even less. But I was still nervous. How could less equity equal more savings?

It’s actually fairly simple: While we’re busy saving, interest rates and home prices are going up. By the time we reach 20 percent down, that money won’t buy us as much house as it will today.

So we decided to play hypothetical math and run some numbers. If we put 10 percent down on a house for $200,000 now and secure a 4 percent interest rate, we'll pay $384,365.11 over the life of the loan.

But if we wait a few years and put 20 percent down on the same house -- which we project might sell for $225,000 -- and secure a 7 percent interest rate, we'll wind up paying $455,613.79 over the life of the loan. That’s $200 more every single month for 30 years, for a total of $70,000 more.

We are gambling

So instead of just saving, we're moving forward and starting to actively look for homes in the Chicago suburbs. It's exciting to actually see what our savings will buy us. We're looking at homes worth around $250,000--even though we only have 10 percent of that for a down payment.

This scenario only works because today’s market is unique. Normally, it really would be best practice to put down 20 percent. But we’re betting that home prices will rise in the two or three years it would take us to save our targeted 20 percent. We’re also betting that interest rates will return to their more normal, pre-bubble rates of 6 or 7 percent (or more) on average.

If none of that happens, then we'll have placed the wrong bet, and it will cost us. A 20 percent down payment would have made us look less risky to lenders, so we wouldn't have had to pay private mortgage insurance (as we will now have to), and we'll pay a bit of a premium on our mortgage rate because we look a little riskier to lenders, since we don't have as much cash at stake.

But if, like us, you don’t have 20 percent saved up yet, you should still check out your options now. Don't wait; don’t be afraid to start the process. Talk to lenders, talk to banks, talk to mortgage brokers and real estate agents.

My biggest mistake was not talking to lenders earlier and hearing about the kind of loans and homes we could actually get. Find out what you can afford and realize that you may well be closer to your dream home than you think.