Increasing home prices, rising market demand, and confusion around down payment requirements are impacting down payment trends across the country, according to this month’s Down Payment Report from Down Payment Resource, an Atlanta-based service that matches buyers with available homeownership programs.
According to the report and National Association of Realtors research, a significant portion of non-homeowners believe they need to put at 10 to 20 percent down in order to buy a house. This confusion is causing many potential buyers to think homeownership is out of reach.
“It’s concerning that there is a larger share of non-homeowners than owners who think they need to put 20 percent down or more,” said Jessica Lautz, Manager of Member & Consumer Survey Research for NAR, “and 87 percent of non-owners think they need to put down 10 percent or more.”
According to the report, which quotes an Optimal Blue analysis, the average down payment in December was $32,680—about 11 percent. Down payment percentages were highest in more expensive markets, with average down payments hitting $110,000 (17 percent) in Washington, D.C., $326,000 (29.9 percent) in San Francisco, and $219,000 (30.2 percent) in Manhattan. Down payment percentages were lowest in rural areas.
Fortunately, for those in need of help, down payment assistance programs are on the rise—particularly in hotter markets. San Francisco has the renewed its Downpayment Assistance Loan Program for the third time, Washington residents can utilize the Washington State Housing Finance Commission’s down payment and closing cost assistance programs, and the CalHome Program and MyHome Assistance Program are there to help California buyers in need of support.
All in all, the number of total down payment assistance programs rose 2.8 percent in 2016. About 87 percent of those programs currently have funds for eligible buyers right now.
In additional efforts to increase access to homeownership, many states are increasing the number of mortgage credit certificates they issue, too. MCCs saw an 8-percent jump last year, and between 2010 and 2015, they increased by more than 400 percent.
“Saving for a down payment often represents the biggest hurdle for first-time home buyers. In December, 25 percent 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,” said Realtor.com’s Chief Economist Jonathan Smoke. “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.”