Traditional homebuying knowledge says that placing no less than 20% of the sale worth towards the down fee is more likely to fulfill mortgage lenders, particularly in sizzling markets.
That aim could appear unattainable for the common homebuyer nowadays — the median-priced U.S. house has surged to $429,500, making a 20% down fee a whopping $85,900, in accordance with knowledge from Realtor.com. However, a current evaluation from the brokerage discovered that there are many markets the place homebuyers put down a a lot smaller quantity on common.
Realtor.com checked out actual property knowledge within the 150 largest metropolitan areas from the agency Optimal Blue to search out out which U.S. cities had the largest — and smallest — common down funds within the third quarter of 2023.
Down funds within the present housing market
Homebuyers are typically inspired to place down no less than 20% of the house sale worth to keep away from paying non-public mortgage insurance coverage. That goal is much more ultimate now that mortgage charges are close to 8% — Realtor.com says that many consumers choose to extend down funds in order that they don’t should pay curiosity on their mortgages.
But house costs are actually outpacing what many Americans earn: A current report from property knowledge agency ATTOM discovered that in additional than half of native markets analyzed, homebuyers wanted annual wages of greater than $75,000 to afford the prices related to the common house.
There is a silver lining, although, in accordance with Realtor.com. Over the final 12 months, down funds have decreased, with consumers placing down a mean of 13.8% of the sale worth final quarter (which incorporates July, August and September). That’s down from 14.7% a 12 months prior.
What’s extra, Realtor.com’s evaluation discovered that down funds have been a lot decrease in areas close to army bases as a result of lively service members and veterans can reap the benefits of 0% loans by way of the U.S. Department of Veterans Affairs.
Qualifying homebuyers also can use Department of Agriculture and Federal Housing Administration loans, the latter of which permit consumers to place down as little as 3.5%. And there isn’t any scarcity of down fee help applications throughout the nation. Most of those DPA applications supply money grants for house purchases that may be even be used for different closing prices, however help also can come within the type of low or no-interest loans. Some states even supply applications particularly for sure professions, like first responders and academics.
Cities with the best down funds
These are the cities the place homebuyers put down the largest down funds for a house within the third quarter of 2023:
- Santa Rosa, California (the place the common purchaser put down 25% of the house worth)
- North Port, Florida (23.5%)
- Fort Collins, Colorado (23.2%)
- Asheville, North Carolina (21.8%)
- Boston, Massachusetts (21%)
What are the Average House Down Payments in the Midwest and South?
The average house down payments in the Midwest and South tend to be lower due to cheap Midwest and South home prices. As a result, aspiring homeowners in these regions can often afford to put down smaller amounts upfront. This financial flexibility can make homeownership more accessible and appealing for individuals and families looking to settle down in these areas.
Cities with the bottom down funds
These are the metropolitan areas that had the bottom common down funds final quarter:
- Killeen, Texas (the place the common purchaser put down 5.3% of the house worth)
- Fayetteville, North Carolina (5.9%)
- Shreveport, Louisiana (6.7%)
- Huntington, West Virginia (8.2%)
- Augusta, Georgia (8.3%)
