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Where Homebuyers Are Making the Largest and Smallest Downpayments

Monday, October 23, 2023   /   by Amy Richardson

Where Homebuyers Are Making the Largest and Smallest Downpayments


Winning the Bid: The Cities Where Homebuyers Are Making the Largest—and Smallest—Down Payments By Clare Trapasso

Oct 23, 2023

A cluster of homebuying dictums has cropped up in recent years and become entrenched as canon. Move fast. Be decisive. Be ready to make a bid by being pre-approved for a mortgage. Expand your horizons and remain flexible to find an affordable dream home. Roll with the punches.

And the one that seemed to tower over the rest: Put as much money as you can for a down payment.

In the most competitive markets, buyers need to plunk down quite a bit of cash (and maybe say a prayer or three) to make their offers more appealing to sellers, compete with all-cash buyers, and ultimately win a bidding war. However, not all markets have such a high barrier to entry, especially during this real estate slowdown. In some markets, buyers don’t need to come up with much cash, if any, to snag prime real estate.

Realtor.com® set out to find the real estate markets where buyers are making the largest down payments for a home—and where they’re putting down the smallest (as a percentage of the home sale price).

The general rule of thumb is buyers should aim to kick in at least 20%, which allows them to avoid paying private mortgage insurance each month. That totals $85,900 on the median-priced home of $429,500 (the median price is according to Realtor.com data from September).

“When prices are rising so much faster than incomes, it’s hard to save more” for a down payment, says Sean Moss, executive vice president of product and operations at Down Payment Resource. “The goal post is always moving.”

Buyers generally need to put down more in the pricier, more competitive markets and in vacation and retirement destinations. Retirees can often sell their existing residences and use the money they earn to pay for their forever homes. And with mortgage rates hovering around 8%, many folks would rather put down more cash so they don’t have to pay interest on a larger loan.

Conversely, down payments were much lower in areas near military installations. That’s because active service members and veterans can use 0% down mortgages offered through the U.S. Department of Veterans Affairs. On top of that, mortgage rates for these loans are typically lower than for 30-year fixed-rate loans.

The good news for buyers: Down payments have fallen over the past year as the housing market has become less competitive. Buyers put an average of 13.8% of the sale price down in the third quarter of this year, down from 14.7% last year, according to a Realtor.com analysis of data from real estate data firm Optimal Blue.

What many buyers don’t realize is how many low and no down payment loans and financial assistance are available, says Moss.

Like VA loans, U.S. Department of Agriculture loans also require no down payment. Then there are Federal Housing Administration loans, which require a minimum of 3.5% down. There is also down payment assistance available for those having a hard time coming up with those funds.

In 2022, about 53.5% of mortgages made in the 10 largest metropolitan areas were eligible for assistance, according to Down Payment Resource. These borrowers were eligible for about $18,144 in down payment funds. In many cases, this money could also be used to help cover closing costs and even buy down mortgage rates.

To come up with the places with the highest and lowest down payments, we dove into data from Optimal Blue. We looked at the average down payments as a percentage of the home sale price in the 150 largest metropolitan areas in the third quarter. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.) We included just one per state to ensure geographic diversity.

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  downpayment, homebuyers, real estate

Home Smart - Savvy Realty Group
Amy Richardson
6909 W Ray Rd #21
Chandler, AZ 85226

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