A down payment of just twenty percent may be a thing of the past MABA MassachusettsRealEstate FirstTimeHomeBuyers MaBuyerAgent

 The twenty percent down payment may now be a thing of the past. A homebuyer who earns the median U.S. household income would need to make a down payment of thirty four point five percent, or almost $127,750, to comfortably afford the monthly mortgage payments for an average home, valued at $360,000, according to a new Zillow report. That’s a significant shift from five years ago when mortgage rates were at four percent, and homes were valued at fifty percent less than they are today, making it possible for someone earning the median income to afford a home’s mortgage payments even with no down payment.

 The shift highlights how the pandemic fueled a red-hot housing market, while the subsequent increase in mortgage rates has tempered its pace. Buyers and sellers have moved to the sidelines with high mortgage rates and for those ready to dive in, competition is stiff with inventory unable to keep up with demand. The down payment required for a typical home in Boston, valued at $701,349, is $432,875 or sixty one point seven percent, which would take twenty three point one years to save. The calculations are based on a household earning the median U.S. income, estimated at $74,580 in 2022, saving ten percent of income with a four percent rate of return.

 Skylar Olsen, chief economist at Zillow, said down payments have always been important, but they are even more so right now.
“With so few available, buyers may have to wait even longer for the right home to hit the market, especially now that buyers can afford less,” she said. “Mortgage rate movements during that time could make the difference between affording that home and not.”
Olsen went on to say that saving enough money is challenging without some help  such as a gift from family or unexpected financial gains like a stock windfall. “To make the finances work, some folks are making a big move across the country, co-buying or buying a home with an extra room to rent out,” she said. “Down payment assistance is another great resource that is too often overlooked.”

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