Saving for a down payment often represents the biggest hurdle for first-time home buyers. In December, 25% of buyers on realtor.com® who were looking to purchase their first home said a key factor holding them back was lacking funds for a down payment. No matter how you cut it, it represents a big chunk of cash. But here’s the thing: It doesn’t always need to be quite so big as most think.
Many first-time buyers don’t realize that it doesn’t necessarily take 20% down to purchase a home.
Indeed, the average down payment in the U.S. on mortgages used to purchase a home was 11%, according to our analysis of loan records from Optimal Blue, an enterprise lending software company.
As with many stats, that 11% average hides lots of variation across loan types and locations. And for some buyers, it may even take more than 20% to buy a home.
Borrowers with jumbo mortgages had to put the highest percentage down, with an average of 23%. Conforming mortgages averaged 18% in 2016. On the other hand, government-backed FHA, VA, and USDA mortgages featured average down payments of 4.8%, 2.2%, and 0.4%, respectively. These government programs are meant to open up more pathways to homeownership for first-time buyers, veterans, and heads of households in rural areas.
The average purchase price of homes financed with a mortgage was just over $290,000 in 2016 across the U.S. The average down payment amount was $32,680, or 11%.
Originally Posted By Jonathan Smoke (Realtor.com)|
Jonathan Smoke is the chief economist of realtor.com, where he analyzes real estate data and trends to develop market insights for the consumer.