This homebuying season is expected to be extremely competitive, especially for first-time buyers who face the challenge of saving for a down payment.
According to a 2024 Bankrate survey, nearly one-third of aspiring homeowners (30%) say it will take at least five years or longer to save enough money for a home, while 10% say it will take a decade or more.
Note: Respondents could select multiple answers. Source: Bankrate survey, Jan. 24–26, 2024
In a 2023 National Association of Realtors® survey, 38% of respondents ranked saving for a down payment the most difficult step in the homebuying process at a time when home prices are expected to rise.
- According to a February Harris Poll, 81% of renters said they would prefer to own a home in the future, but only 38% said they were currently saving for a down payment.
- NAR reports the median down payment for first-time buyers is 8%, which translates to $28,000 for a median-priced $350,000 home.
- Nearly one-quarter (23%) of first-time buyers used a gift from friends or family for their down payment.
- First-time buyers accounted for 32% of home sales, according to NAR’s 2024 Home Buyers and Sellers Generational Trends Report, up from 26% the previous year.
Zillow’s latest Rent Report states rent nationwide averaged $1,983 in March, meaning renters spent more than $23,700 a year on rent alone — not including utilities, maintenance and other fees. In 2022, the median monthly cost of homeownership was $1,775 per month, according to the U.S. Census Bureau.
Mortgage loan officers will most likely get questions about down payment requirements during the spring and summer homebuying seasons. Home prices and competition are higher during this period, making it even harder for first-time buyers. As a result, many first-time buyers either postpone their purchase, settle for a less desirable home or stop searching.
Tip #1: Automate Savings
By setting up a separate savings account for their down payment fund, borrowers can have money automatically transferred to it monthly. This helps them avoid spending money on other things and builds their savings habit. You can also suggest some apps or tools to track their progress and motivate them to reach their goal.
Tip #2: Learn about Low-Down-Payment Options
Many first-time buyers are unaware of the various low-down-payment options available, including mortgage insurance that enables qualified borrowers to qualify for a mortgage with a modest down payment. Most Mortgage Insurance companies offer discounted premiums for first time buyers. This could lower the monthly mortgage payment and increase buying power.
Tip #3: Down-Payment Assistance Programs (DPA)
In many areas, eligible first-time homebuyers can qualify for down payment help with grants, loans or tax credits. State and local governments offer some of these DPA programs, while others are available from nonprofits or employers. You can find and apply for these programs by using online resources, contacting a local mortgage professional or reaching out to local housing agencies.
