Seventy-four percent of those who bought a property as their primary residence used financing, and that number climbs to ninety-one percent for first-time purchasers. Most of the time, purchasers put down a down payment when they get a loan to buy a property. But how much does it cost? And where does it originate from?
Here are two of the main things that home purchasers don't know:
How much do you usually have to put down?
What do you need to do to become a homeowner?
This vital information tells the possible buyer how much to save and, just as importantly, how long that process might take. It's better to look for the correct source than to use old knowledge or, even worse, false information. Sadly, 97% of the NAR members who were asked said that their clients talked to family members for advise instead of a real estate agent, even if the family member didn't live in the house. Let's look at the actual numbers.
A lot of people who want to buy their first house think they need to put down 20% of the price. However, since 2018, the average down payment for first-time buyers has been between 6% and 9%. The typical down payment has only ever been as high as 10% since the NAR started collecting this information in 1989. Last year, though, the average down payment for people who bought again was 23%. As the value of homes has gone up, the down payments for repeat buyers have consistently gone up over the past few years. In 2014, repeat buyers only paid down 13% of the buying amount as a down payment, on the other hand.
There are several lending choices for buyers. Most people who buy a home use traditional financing to do it. 29% of first-time homebuyers used an FHA loan. With an FHA loan, you only have to put down 3.5% of the total. Nine percent of people who bought a home for the first time used a VA loan. You don't have to put down any money for a VA loan.
A housing consultant or mortgage broker can talk to buyers about the several types of loans they can get. The Down Payment Resource is another place where those who want to buy a home can find help. There is a website that lets people look into state and local programs that they might be able to get into. There may be programs in your area that can help with down payments, as well as student loans, property taxes, and even home improvements.
The last question can be: Where did you get the money for the down payment? For almost 70% of first-time buyers, their down payment comes from savings. A quarter of customers used a gift from a friend or family member. The percentage of families getting support has gone down from a high of 36% in 2010. The First-Time Home Buyer Tax Credit brought a lot of new purchasers into the market in 2010. Family may have pushed purchasers to start the process of buying a property and helped them in whatever way they could at the time. Also, since the average age of first-time buyers is now 38, which is the highest it has ever been, it can be hard to approach family for help buying their first house.
More first-time buyers are using their savings to make their down payments in recent years. Twenty-one percent of first-time purchasers utilized money from equities, bonds, a 401(k), an IRA, or even cryptocurrency. To put this in historical context, just 8% to 11% of first-time purchasers used financial assets between 1997 and 2002. There may be more younger investors or wealthier first-time purchasers in the property market, which could explain this rise.
Even though less than 10% of first-time buyers use inheritances for their down payment, this number is at an all-time high. Seven percent of people who bought their first house used an inheritance from a family member to help them buy it. Also, because home prices are higher, buyers may need to use more than one source to make a down payment.
Find out more at NAR. Get a recommendation for a qualified lender from the Hersey Group.
