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Many Consumers Confused About Down Payments

by Leighton, Kelly on

More than 80% of would-be homebuyers said they are stressed about affording a down payment.

However, many are uneducated about what is necessary for a down payment. According to a recent Lending Tree survey, for those who have never been homeowners, 41% think a 20% down payment is a requirement to owning a home. That number drops slightly to 34% when you include consumers who have owned a property prior. Additionally, 21% said that a down payment is their only obstacle to obtaining homeownership. Around half of respondents said they don’t want to pay private mortgage insurance, so they are not willing to put less than 20% down. However, many consumers don’t know much about PMI at all. Around 60% said they don’t know how to get rid of PMI and 34% said they think it has something to do with reaching 20% in home equity, but are unsure if it automatically goes away or a refinance is necessary.

“Helping our clients navigate the financial part of the transaction is one of the most important services we provide as Realtors®. It’s one of the issues that causes them the most stress in the transaction,” said PAR President Christopher Beadling. “There are many programs available to help first-time homebuyers with down payment assistance. It’s so important to help educate them about what type of down payment is actually needed.”

For those who have purchased a home, around 63% put less than 20% down, including 17% who put 0% down and 6% who put 4% down or less. However, 30% of homeowners said in retrospect, they wish they had put more down, including 44% of millennials. For current homeowners, 55% said their down payment came from money they had saved for the purpose, 22% used profits from selling a previous property and 16% used a gift from a loved one. For would-be buyers, 64% plan to rely on money saved for this purpose, 27% plan to use a personal loan and 18% plan to rely on a state or city down payment assistance program.

Topics

Down payment
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