Some real estate buyers make false assumptions about how much of a down payment they need to be able to buy a home, according to a recent survey by the National Association of Realtors.
The NAR’s 2017 National Housing Pulse survey of 1,500 adults nationwide found that almost 40 percent of consumers believe a down payment of at least 15 percent of the home’s value is needed to obtain a mortgage. However, the reality is that the median down payment for first-time homebuyers is just six percent of the home’s value, while repeat buyers do tend to put down an average of 14 percent, though that isn’t always necessary.
The survey found that misconceptions around down payments were highest in the biggest cities, and by older adults.
“Apparent confusion about down payment requirements most likely added to non-owners' concerns about affordability,” NAR said in a statement.
Among the other findings of the survey, around 60 percent of consumers said they have concerns about affordability and rising housing costs for both rental and bought homes. Those on low incomes, renters and young women indicated they were the worst hit by affordability problems. Altogether, over 50 percent of unmarried and non-white Americans said the lack of affordable housing was a “major problem”, while only 40 percent of married, white Americans said the same thing.
Setting affordability concerns aside, 84 percent of Americans surveyed say they believe purchasing a home is a smart financial decision, which is the highest number of respondents since 2007.
“Despite the growing concern over affordable housing, this survey makes it clear that a strong majority still believe in homeownership and aspire to own a home of their own,” said NAR President William E. Brown. “Building equity, wanting a stable and safe environment, and having the freedom to choose their neighborhood remain the top reasons to own a home.”
Respondents also indicated that the chance to build wealth through home equity rather than pay rent; to own a home outright in retirement by paying off the mortgage; and the belief that ownership is a good investment, were the top financial reasons for wanting to buy a home.