Almost a third of potential homeowners think they need to put down 20% or more as a down payment, according to a survey completed by Freddie Mac [1]. Additionally, the GSE found that 30% of renters and nearly 25% of existing renters and existing homeowners don’t know how much lenders require. Around 70% of survey respondents who are planning to buy a home said that a 20% down payment would delay their homebuying decision, while almost 30% indicated they would never be able to afford a home.
Using data from the National Survey of Mortgage Originations, Freddie Mac looked at where the money for down payments would be coming from for potential homebuyers. According to the Survey, the amount of buyers who would be paying from their own savings/inheritance/other assets declined since 2013, down to 70% from 79%. Another 31% of homebuyers used proceeds from the sale of another property, up from 23% in 2013, and 10% of home buyers used assistance or a loan from a nonprofit or government agency, up from 5% in 2013.
From this data, Freddie Mac concludes that down payments can come from different sources and do not have to come only from personal savings, although the majority of consumers used their personal savings or investments for their down payment in recent years. Additionally, potential homebuyers may be mistaken about the 20% down payment. In 2018, the median down payment on a house was 13% for buyers overall, and 7% for first-time buyers according to the National Association of Realtors, meaning a down payment may not be as unaffordable as many believe.
Many first time buyers are not only utilizing their family to assist with down payments, but with other aspects of the mortgage process. Freddie Mac notes that some young adults are receiving assistance from their parents in the form of co-signing the mortgage loan, especially for first time buyers. However, the percentage of young adult homebuyers with family co-borrowers remains small.