While it might be the industry gold standard, the “typical” 20 percent down payment doesn’t exactly glitter with the majority of first-time millennial mortgage getters. When queried about their quintessential down payment level, two in three—or 68 percent—of homebuyers in this cohort say they’d prefer to put down under 20 percent, according to the latest ValueInsured Modern Homebuyer survey.
At least in terms of ideal down, the “new normal” down payment seems to be 10 percent. Nearly one in four (24 percent) opted for this level; another 11 percent say that a 15 percent down would be just fine with them.
If granted the option to select their down payment level, 7 percent of all millennial first-time buyers fancy a zero-percent- down payment loan, the survey reveals. In a perfect world, 26 percent desire to put down 3 to 5 percent. Strictly speaking, one in three (33 percent) say their ideal down payment is up to 5 percent, the survey notes.
Why such diminutive down payments? Most of the respondents cited “eagerness to buy immediately” as their prime motivator, with the understanding that their more paltry down payment could result in a higher interest rate and a bigger monthly mortgage bill. But it appears that for one in three homebuyers in this age group, trading less upfront cash for more money on the backend is the perfect tradeoff.
Then, there’s this: 12 percent surveyed contend they could afford to give more money but would rather free up capital for other investments instead. For the record, 15 percent of survey takers selected a 20 down payment as their ideal, while 17 percent prefer a payment of more than 20 percent, effectively making buyers who want to put a down payment of 20 percent or more a minority (32 percent).
Almost all in this group maintain that having a lower monthly mortgage bill is the impetus behind their squirreling away more dough for their down payment. Another 10 percent say they’re planning to put down more because they’re receiving a cash gift to help augment their own down payment nest egg.