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Down Payment Trends for First-Time Homebuyers in the US (2020-2024)

2/17/2025

Introduction

A common misconception among aspiring homeowners is that a 20% down payment is required to purchase a home. However, this is not the case, and many options exist for lower down payments 1. This report delves into down payment trends for first-time homebuyers in the US over the last five years, providing a comprehensive overview of median values, variations by state and demographics, and the impact of factors like student loan debt. The goal is to provide valuable insights into the challenges and opportunities facing first-time homebuyers in today's dynamic real estate market 2.

Median Down Payments for First-Time Homebuyers in the US (2020-2024)

While 20% has long been considered the standard down payment, data reveals that most first-time homebuyers put down less. In 2024, the median down payment for first-time homebuyers was 9% 2. This trend of lower down payments is likely influenced by several factors, including rising home prices, increased availability of low down payment loan programs, and the desire to retain funds for other homebuying expenses 2. Data from Redfin shows that the typical homebuyer's down payment in June 2024 reached a record $67,500. This figure is valuable as it represents the actual amount homebuyers are putting down, regardless of the home's price 3. Unfortunately, specific data on median down payments for first-time homebuyers for the years 2020, 2021, and 2022 is limited. However, we do have some data points for 2023:

  • 2023: The median down payment for first-time homebuyers was 8% 4. This is the highest percentage since 1997, indicating a potential upward trend in down payment amounts 5.

Median Down Payments by State (2020-2024)

Data on median down payments by state for first-time homebuyers over the past five years is limited. However, available information suggests significant variations across states. These variations are influenced by factors such as median home values, income levels, and living expenses, which impact down payment affordability in different states 6. For instance, one study found that Hawaii has the highest median down payment, exceeding $134,850, while Iowa has the lowest at $33,150 7. Another study ranked states based on the average time it takes first-time homebuyers to save for a down payment, with Hawaii taking the longest at 13 years and 4 months, and West Virginia the shortest at 2 years and 1 month 6.

Median Down Payments by Demographics (2020-2024)

Analyzing down payment trends by demographics provides a deeper understanding of the challenges faced by different groups of first-time homebuyers. While specific data for the entire period is limited, here are some key findings:

  • Age: Younger homebuyers (aged 25-33) tend to make smaller down payments (around 10%) compared to older buyers (aged 69-77), who put down as much as 35% 8. This difference likely reflects accumulated wealth and financial stability over time. Data from Mortgage Research shows the following breakdown of down payment amounts by age group in 2024 9:
AgeDown payment amount
25-3310%
34-4313%
44-5815%
59-6822%
69-7735%
78-9829%
  • Income: First-time homebuyers generally have lower median household incomes compared to repeat buyers, impacting their ability to save for larger down payments 10.
  • Race: While data on down payments by race is limited, one study found that 81% of first-time homebuyers are White, with smaller percentages for Hispanic and Black/African American buyers 10. This suggests potential disparities in access to homeownership and down payment affordability.
  • Gift Funds: A significant percentage of first-time homebuyers (29%) rely on gift funds from family or friends for their down payment 10. This highlights a potential reliance on familial support to overcome the financial hurdle of a down payment.

Analysis of Down Payment Trends (2020-2024)

Several factors contribute to the observed trends in down payments for first-time homebuyers:
Economic Factors:

  • Rising Home Prices: The significant increase in home prices in recent years has made it more challenging for first-time buyers to save for a down payment 3. This is particularly true in competitive housing markets where prices have skyrocketed.
  • Elevated Mortgage Rates: Higher mortgage rates incentivize buyers to make larger down payments to reduce their loan amount and monthly payments. This can create an additional hurdle for first-time buyers already struggling with affordability. Redfin notes that higher home prices naturally lead to higher down payments, and elevated mortgage rates push buyers to increase their down payment to minimize monthly payments 3.

Loan Programs:

  • Increased Availability of Low Down Payment Loans: The availability of loan programs requiring as little as 3% down has made homeownership more accessible to first-time buyers 2. These programs, including conventional loans like Fannie Mae HomeReady and Freddie Mac Home Possible, as well as FHA loans, VA loans, and USDA loans, offer alternatives to the traditional 20% down payment 1.

Assistance Programs:

  • Down Payment Assistance Programs: Various down payment assistance programs offered by government agencies and non-profit organizations can help first-time buyers overcome the financial barrier of a down payment 11. These programs provide grants, loans, or tax credits to eligible buyers, making homeownership more attainable.

Other Trends:

  • Multigenerational Homes: An increasing trend in the housing market is the purchase of multigenerational homes. This trend is driven by factors such as cost savings, the need to care for aging parents, and adult children returning or staying in the family home 12. This trend can impact down payment considerations as families pool resources and potentially make larger down payments.
  • Affordability Challenges: Despite the availability of low down payment options and assistance programs, affordability remains a significant concern for first-time homebuyers. Data from the Kansas City Fed shows that affordability has worsened over the last five years due to rising home prices and higher borrowing costs not being fully offset by wage gains 13. This has significant implications for the housing market and highlights the need for continued efforts to address affordability challenges.

Impact of Student Loan Debt on Down Payments

Student loan debt has a significant impact on the ability of first-time homebuyers to save for a down payment. Studies have shown that student loan debt can delay homeownership and reduce the amount first-time buyers can spend on a home. High student loan payments can limit affordability and make it challenging to meet debt-to-income requirements for a mortgage. In fact, first-time homebuyers with student loan debt spend an average of 39% less on their homes than buyers without such debt 14. This highlights the need for strategies to manage student loan debt and explore options like down payment assistance programs to mitigate its impact on homeownership.

Down Payment Assistance Programs

A variety of down payment assistance programs are available to help first-time homebuyers. These programs, often offered by state and local governments or non-profit organizations, provide financial assistance in the form of grants, loans, or tax credits. Some examples include:

  • CalHFA: The California Housing Finance Agency offers various programs, including the MyHome Assistance Program, which provides a deferred-payment junior loan to assist with down payment and closing costs 11.
  • Virginia Housing Development Authority: Offers down payment and closing cost assistance programs for first-time homebuyers with income restrictions 15.
  • NYC HomeFirst Down Payment Assistance Program: Provides qualified first-time homebuyers in New York City with up to $100,000 towards the down payment or closing costs 16.

These programs can be valuable resources for first-time homebuyers, especially those with limited savings or facing financial challenges.

Different Types of Down Payment Assistance Programs

Beyond the specific programs mentioned above, several types of down payment assistance are available to first-time homebuyers:

  • Government-backed home loans: These loans, such as FHA loans, VA loans, and USDA loans, often have lower down payment requirements than conventional loans, making them more accessible to first-time buyers.
  • Homeownership vouchers: These vouchers, offered through programs like the Housing Choice Voucher homeownership program, can help low-income first-time homebuyers with down payment and closing costs, as well as ongoing housing expenses.
  • Real estate sales by the government: Government agencies sometimes sell real estate and federal lands acquired through foreclosure, forfeiture, or failed banks. These sales can offer opportunities for first-time homebuyers to purchase properties at below-market prices 17.

Home Purchase Trends

Understanding the types of homes purchased by first-time homebuyers provides valuable context for analyzing down payment trends. Data from the National Association of Realtors shows that detached single-family homes continue to be the most common home type for recent buyers, accounting for 75% of purchases. Townhouses or row houses are the second most popular choice at 7% 18. This preference for single-family homes may influence down payment decisions, as these properties often come with higher price tags and require larger down payments.

Conclusion

Down payment trends for first-time homebuyers in the US reflect the evolving dynamics of the real estate market. While the median down payment remains below the traditional 20%, data from 2024 shows a median of 9% for first-time buyers and 18% for all buyers. This is the highest down payment for first-time buyers since 1997, suggesting a potential upward trend. However, complete trend data for the 2020-2024 period is unavailable, making it difficult to draw definitive conclusions about long-term changes.
Rising home prices, higher mortgage rates, and student loan debt pose significant challenges to affordability for first-time homebuyers. However, the increased availability of low down payment loan programs and down payment assistance programs offers opportunities to overcome these challenges. These trends have several implications for the real estate industry. Lenders may need to adapt their lending practices to accommodate the growing demand for low down payment loans and consider the impact of student loan debt on affordability. Housing policy may need to address the rising cost of homeownership and expand access to down payment assistance programs. Real estate agencies can play a crucial role in educating first-time homebuyers about available resources and guiding them through the complexities of the market.
By understanding these trends and utilizing available resources, first-time homebuyers can navigate the market effectively and make informed decisions towards their homeownership goals.

Works cited

Footnotes

  1. 20% Down? The Myth That Could Be Holding Home Buyers Back - NerdWallet, accessed February 17, 2025, https://www.nerdwallet.com/article/mortgages/data-down-payment ↩ ↩2

  2. Average Down Payment For First-Time Homebuyers - Bankrate, accessed February 17, 2025, https://www.bankrate.com/mortgages/down-payment-for-first-time-homebuyers/ ↩ ↩2 ↩3 ↩4

  3. The Typical Homebuyer's Down Payment is a Record $67,500 - Redfin, accessed February 17, 2025, https://www.redfin.com/news/all-cash-homebuyers-june-2024/ ↩ ↩2 ↩3

  4. NAR Finds Typical Home Buyer's Annual Household Income Climbed to Record High of $107,000 in Wake of Rising Home Prices and Mortgage Rates, accessed February 17, 2025, https://www.nar.realtor/newsroom/nar-finds-typical-home-buyers-annual-household-income-climbed-to-record-high-of-107000 ↩

  5. What a $25k Down Payment Aid From Harris Could Really Mean For First-Time Homebuyers, accessed February 17, 2025, https://time.com/7095175/down-payment-harris-plan-could-mean-for-first-time-homebuyers/ ↩

  6. Best States for First-Time Homebuyers: Save Downpayment Faster, accessed February 17, 2025, https://resimpli.com/blog/best-states-for-first-time-homebuyers/ ↩ ↩2

  7. What Is the Median Down Payment by State? - This Old House, accessed February 17, 2025, https://www.thisoldhouse.com/moving/down-payment-by-state ↩

  8. Average Down Payment On A House | Bankrate, accessed February 17, 2025, https://www.bankrate.com/mortgages/average-down-payment/ ↩

  9. What Is the Average Down Payment on a House?, accessed February 17, 2025, https://www.mortgageresearch.com/articles/average-down-payment-on-a-house/ ↩

  10. 70+ First-Time Homebuyer Stats: Market Reality Check (2025 ..., accessed February 17, 2025, https://resimpli.com/blog/first-time-homebuyer-statistics/ ↩ ↩2 ↩3

  11. Homebuyers Loan Program - California Housing Finance Agency - CA.gov, accessed February 17, 2025, https://www.calhfa.ca.gov/homebuyer/programs/index.htm ↩ ↩2

  12. First-Time Home Buyers Shrink to Historic Low of 24% as Buyer Age Hits Record High, accessed February 17, 2025, https://www.nar.realtor/newsroom/first-time-home-buyers-shrink-to-historic-low-of-24-as-buyer-age-hits-record-high ↩

  13. First-Time Homeownership Became Less Affordable Across Most of the United States in Recent Years - Federal Reserve Bank of Kansas City, accessed February 17, 2025, https://www.kansascityfed.org/research/economic-bulletin/first-time-homeownership-became-less-affordable-across-most-of-the-united-states-in-recent-years/ ↩

  14. Student Loan Debt & Homeownership - Education Data Initiative, accessed February 17, 2025, https://educationdata.org/student-loan-debt-homeownership ↩

  15. Homeownership Down Payment Assistance Program (DPA) - DHCD (virginia.gov), accessed February 17, 2025, https://www.dhcd.virginia.gov/dpa ↩

  16. HomeFirst Down Payment Assistance Program - HPD - NYC.gov, accessed February 17, 2025, https://www.nyc.gov/site/hpd/services-and-information/homefirst-down-payment-assistance-program.page ↩

  17. Home buying assistance | USAGov, accessed February 17, 2025, https://www.usa.gov/buying-home-programs ↩

  18. Highlights From the Profile of Home Buyers and Sellers, accessed February 17, 2025, https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers ↩