Report: Down Payment Myths Prevail
July 13, 2017
Your clients may be under a false assumption on the necessary down payment they need to buy a home. Four in 10 recently surveyed Americans believe that a down payment of 15 percent or more is needed to purchase a home, according to the National Association of REALTORS®’ 2017 National Housing Pulse Survey, a survey of 1,500 adults nationwide.
Read more: Smaller Down Payments Lure More Buyers
The reality is that the median down payment for first-time buyers is about 6 percent, and repeat buyers tend to put down about 14 percent. A growing number of lenders are also requiring much less.
Misperceptions about high down payment requirements were most prevalent in bigger cities and by older adults, according to the survey.
“Apparent confusion about down payment requirements most likely added to nonowners' concerns about affordability,” NAR states in its report.
Six in 10 Americans surveyed said they are concerned about affordability and the rising costs of buying a home or renting in their area. Low-income Americans, renters, and young women reported feeling the constraints of housing affordability the most. More than five out of 10 unmarried and nonwhite Americans view the lack of available affordable housing as a major problem, compared to just 40 percent of married and white Americans, the survey shows.
Setting affordability concerns aside, 84 percent of Americans surveyed say they believe purchasing a home is a smart financial decision, which is the highest number of respondents since 2007.
“Despite the growing concern over affordable housing, this survey makes it clear that a strong majority still believe in homeownership and aspire to own a home of their own,” says NAR President William E. Brown. “Building equity, wanting a stable and safe environment, and having the freedom to choose their neighborhood remain the top reasons to own a home.”
Survey respondents cited the top financial reasons for buying a home: to build wealth through home equity rather than pay rent; to own a home outright in retirement by paying off the mortgage; and the belief that ownership is a good investment.
Updated: November 25, 2020