Many First-Time Buyers Turn to Family for Down Payment Help
January 29, 2020
One-third of first-time buyers turned to family and friends for financial help in purchasing a home last year, according to data from the National Association of REALTORS®. Indeed, 27% received a gift from family or friends, the data shows.
“Using family as a source of down payment help is most common among younger millennial buyers (ages 20 to 28) compared to other generations, and is more common among unmarried couples,” writes Jessica Lautz, vice president of demographics and behavior insights at the National Association of REALTORS®, on NAR’s Economists’ Outlook blog. “Both sets of buyers have lower household incomes so may be less likely to scrape together the funds individually.”
They also tend to pull from the savings they do have. Seventy-eight percent of first-time buyers also used savings to make a home purchase, many within combination to financial gifts they received from family and friends too, the data shows.
Getting financial help from family is also allowing some first-time buyers to skip out on renting. Many are choosing to live at home and then transition directly into homeownership. Nearly one-quarter of first-time buyers move directly from their parents, friends, or family’s home into homeownership, according to NAR. The percentage has grown from 12% in 1993 to now 23%.
“This living arrangement provides a number of benefits: Not only can a first-time buyer save for a down payment without the cost of rent, but they can also pay down any debt and get their debt-to-income ratio in check,” Lautz says. “It may also be easier to navigate the tight housing market, as the buyer does not need to line up when a rental lease ends with the timing of purchasing a home. They are free to put down contracts on homes, which they may not get, with less pressure of where they will live if they lose out.”
“Bank of Mom and Dad,” National Association of REALTORS® Economists’ Outlook blog (Jan. 28, 2020)
Updated: July 15, 2020