A new survey finds down payments have hit an unrealistic number that most average Americans can’t afford.
Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…
The interesting study
Middle-class Americans now need $127,000 saved for a down payment on a home. Five years ago, average earners could’ve afforded a typical home with no money down.
That’s according to a 2024 analysis from real estate company Zillow.
The big result
Even with mortgage rates dropping, median-income earners need a 35% down payment to afford their monthly payments. CNET recently released a separate survey revealing similar results.
More than 1 in 3 (36%) respondents said inflation was “one of their primary obstacles” to homeownership. The mortgage rate for a 30-year mortgage is hovering right around 6%. Only 4% of those polled by CNET say they can “realistically consider buying a home” at that rate.
The fascinating details
Zillow says there are still affordable markets, but they’re undesirable. Many Midwest markets are located in areas where a median-income earner can purchase with 20% down.
According to Zillow, it will take a middle-income earner 12 years to save a $127,000 down payment. The real estate company found that 43% of last year’s homebuyers purchased with cash gifts from friends and family members.
The Federal Reserve has started cutting interest rates. CNET says mortgage rates could drop to “the mid-5 range later next year.”
What you can do
“Mortgage rates may be higher due to the current economic state, but that doesn’t mean homeownership is impossible,” says Sandra Tobon, Director of Housing Counseling & Community Outreach. “Future homebuyers can still qualify for down payment assistance from different municipalities. They should check resources available through their county.”
Some people may decide to wait for mortgage rates to fall while focusing on their personal finances. Tobon recommends building a solid budget, increasing savings, and lowering credit card debt. With lower personal debt and a higher credit score, homeownership will become easier when the time is right.
“Prospective homebuyers should work to get their credit score above 715,” Tobon says. “These financial steps take time. It’s crucial to create a clear plan while waiting for lower interest rates, improved market inventory, and a clearer political environment.”
Tobon encourages renters who are struggling to get their finances in orfer to reach out to a HUD-approved housing counseling agency. Housing counselors who are certified to give advice in the area where you want to buy know these programs. They can help you find down payment assistance, making it easier to clear that hurdle.
For more information, call Consolidated Credit’s HUD-certified housing counseling team at 1-800-435-2261
