In decades past, buying a home meant coming up with at least 20% of the purchase price. But these days, the average home buyer has a tough time putting anywhere near 20% down when they purchase a home. In fact, last year, the average down payment on a single family home purchase was only 14.8%. Nor do we rely on risky subprime loans anymore to provide 100% financing for your home purchase, like the ones that were so prevalent before the mortgage meltdown and financial collapse.
Here are 20 facts and figures about down payments – and down payment assistance – when buying a home:
1) There are about 78 million single-family homes and condominiums in the U.S., and 87% of them (68 million homes) could potentially qualify for some sort of down payment assistance program, grant, or other down payment help.
2) Down payment assistance programs are not just for first-time homebuyers, as 37% of these programs do not require a borrower to be a first-time buyer.
3) There are more than 2,400 grants, funds, and assistance programs across the country, and 85% of them have funds available for homebuyers at any given time.
4) About 14% of down payment assistance programs are earmarked for individuals that play important roles in our communities, like educators, public servants, healthcare workers, and military veterans.
5) 70% of down payment and closing costs assistance programs come from:
- Grants – “gift” assistance that does not have to be repaid
- Second mortgages – loans with very low or no interest rate where the payment may be deferred or forgiven incrementally for each year the buyer remains in the home.
- Neighborhood Stabilization Programs –
- Combined first mortgage and down payment programs
6) 9% of all assistance comes in the form of Mortgage Credit Certificates (MCCs), which provide up to $2,000 in annual tax credits for the life of the loan.
7) 9% of buyer assistance comes in the form of first mortgage loans that are below-market interest rates, have low or no mortgage insurance, or provide 100% financing.
8) The remaining 12% are a mix of additional programs, including Employer Assisted Housing programs and individual Development Accounts that provide a matching down payment savings program.
9) Less than 10% of home buyers ever apply for any sort of down payment assistance program.
10) When they are approved, the average assistance for homebuyers adds up to $11,565 – quite a help!
11) Homeownership rates are now 63.7% in the U.S., a modern-era low. One of the principal reasons why more people aren’t buying homes is difficulty coming up with a down payment.
12) In fact, studies reveal that renters in the nation’s 20 largest metro areas say that coming up with a down payment is the #1 obstacle to buying a home.
According to this study, the top reasons for not buying a home include:
- 67.9% Can’t come up with the down payment necessary to buy
- 53.2% Difficulty qualifying for a mortgage
- 50% Too much debt (particular student loans and credit cards) kept them from buying
- 38.5% Job security
- 20% Not in a position to settle down
- 11% Not enough homes available
- (Participants could choose more than one reason they weren’t able to buy)
13) In the largest cities and metro areas in the U.S., coming up with a down payment can be even more prohibitive, ranking as the #1 concern among all potential home buyers.
In fact, in Los Angeles, Boston, San Diego, St. Louis, Tampa, San Jose, and Washington, D.C. significantly more than the national average of 70% of renters said that the down payment and upfront costs were keeping them from buying.
And in areas like San Jose and Los Angeles with super high-cost real estate, a 20 percent down payment adds up to 180% of median income for one year!
14) Is coming up with a 20% down payment to buy really that much of a stretch for the rest of the country, too?
If we consider that the current U.S. median price for a home is $195,700 (sorry, California – this won’t apply to you), the average home buyer would need to pay $39,140 as a 20 percent down payment (and that’s before closing costs and other fees). However, with the median U.S. household income only about $53 $53,889 (as of 2015), a typical buyer would have to pay at least 72% of his or her annual income just to purchase a home!
15) Even if we dip far lower than 20% down, the down payment can make up a serious chunk of peoples’ wages. Consider that just a 3% down payment would require 14% of total annual wages in 513 counties surveyed around the country, and in 67 counties, that same 3% down payment would require parting with more than 20% of annual wages!
16) Today’s home buyers are having such a challenging time coming up with the necessary down payment that about 25% of them are turning to family and friends for gifted funds to help them buy.
17) Down payment assistance is needed more now than ever when you consider that people still do want to buy homes, yet just can’t seem to come up with the down payment or work out the financial aspect. In fact, 63% of all renters are confident they will be able to afford a home someday, and 81% of all Americans still think that owning a home is the American Dream.
18) In certain markets – including several local NorCal areas – buyers using down payment assistance programs realize the biggest total dollar savings, including Kauai County, Hawaii ($80,148 total savings over the life of the loan); Placer County, California, in the Sacramento metro area ($78,539); San Francisco County, California ($77,411); Orange County, California in the Los Angeles metro area ($74,268); and Shasta County (Redding), California ($70,806).
19) The average down payment assistance covers at least 3% of the median home sale price in 82 percent of all counties surveyed. But spanning all 513 counties, the average down payment assistance added up to $12,434 – nearly twice the 3% down payment on a median priced home.
20) Of course, programs vary by state, county, and even neighborhood. But these are the states with the greatest number of down payment assistance programs:
California (412)
Florida (226)
Texas (203)
Maryland (106)
New York (75)
Massachusetts )72)
Pennsylvania (71)
Colorado (68)
Georgia (61)
Washington (57)
These are the top counties for down payment help in the U.S., with their % of homes that qualify:
Wayne, MI 94.37% of homes qualify
Maricopa, AZ 92.67%
Harris, TX 85.79%
Cook, IL 84.80%
Los Angeles, CA 78.18%
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Look for part two of this blog where we go in depth into the different down payment assistance programs available for eligible home buyers!