You’re sick to death of watching your rent checks circle down the drain. Your spouse is jonesing for his or her dream kitchen, complete with quartz counters, a Sub-Zero fridge, and a funky backsplash. Your kids want space to run around—and you desperately want space from them.
Yes, my friends, it’s time to buy a home.
But after some quick number crunching, you find yourself face to face with the most terrifying and seemingly insurmountable part of the process, the Mount Everest of home buying: that towering down payment. It isn’t a pretty picture. Who on Earth has that much money lying around?
Making matters more complicated, not all home buyers feel your pain—or at least, not as deeply. In some parts of the country, a down payment might be greater than your annual salary; in others, you can save for it by packing lunch, skipping daily lattes for a few months, and banking your tax return.
So the realtor.com® data team set out to find where buyers will fork over more than the industry benchmark 20% down payment for homes—and where they’ll need to plunk down only single-digit percentages.
Lenders prefer those gold standard 20% down payments because they ensure that buyers have enough skin in the game—and buyers aspire to them to avoid costly private mortgage insurance, which would allow them to put down less cash on the table. But many buyers also have access to a variety of mortgage programs, such as the Federal Housing Administration loan, which allow those with decent credit scores to put down only 3.5%. The catch: In some markets (often with sky-high home prices), many homes don’t qualify for these programs.
“Coming up with a big-enough down payment is one of the top impediments to purchase,” says Javier Vivas, director of economic research at realtor.com. "It’s really challenging for younger buyers who don’t have deep pockets and haven’t had time to build up that big financial lump sum."
And did we mention mortgage interest rates are also going up?
“Buyers are cutting back and trying to save, but prices are rising even faster, and the market is overtaking their ability to afford a home,” says Joe Melendez, founder and CEO of ValueInsured, a Texas-based firm that sells down payment insurance to home buyers. "They are continually falling behind."
Our team analyzed mortgage data to come up with the average percentage down payment in each of the 50 largest metropolitan areas, taking into account those who anted up way above average as well as those who used government-subsidized, low-cost loans. We looked at realtor.com home prices and mortgage data from Optimal Blue, a real estate data firm that specializes in lending records, to come up with our findings. (All-cash purchases, common in blazing-hot markets, were not considered.)
The unfortunate truth: The markets where down payments regularly blow way past the norm are often the ones where homes also cost the most. Looking to own a sweet two-bedroom condo with a view in Manhattan? You’d better get ready to plunk down a half-mil, or much more.
But those old rules of supply and demand aren’t the full story—there are plenty of exceptions across the U.S. Red-hot Washington, DC, didn’t even make our top 10 with an average down payment of just 11.8%—the same as perennially downtrodden Detroit. (DC has lots of veterans who are eligible for low down payment loans.) But the median home price in DC is $425,000, compared with $204,600 in Detroit.
Been saving those pennies? Then let’s take a look at how many you’ll need, and the housing trends that explain them.
Markets with the highest down payment percentages
Let’s start by looking at the housing markets where people are putting down the highest percentage of their home price. We really hope you’re sitting down for this.
Trend No. 1: Saving up for a down payment in California? Good luck
Every spring, a new crop of computer science grads and bright-eyed entrepreneurs make their way to the San Francisco Bay Area. They land great gigs at places such as Google and Twitter, and have all the free snacks and nap pods their hearts could desire. It’s too bad homeownership in San Jose and San Francisco, the twin gateways of Silicon Valley, could still be light-years away.
The average down payment in the San Jose metro was highest on our list, at 23.9%, according to our findings. In the nearby San Francisco metro, which came in second, it was just slightly lower, at 22.6%. That number really sinks in when you consider how much homes in the Bay Area cost. The median listing price is $1.2 million in San Jose and $899,000 in San Francisco.
This all means that you’re going to need to shell out a big chunk of change to buy here. Over the past 12 months, the average down payment in San Jose was $257,000. In San Francisco that figure was $212,000.
Plaza de Cesar Chavez in San Jose, CA iStock
In fact, San Jose holds the ignominious honor of being the metro with both the highest home prices and the highest down payments in the U.S.—a Bay Area double whammy!
“The competition is very strong. You need at least 20% to be competitive,” says Heidi Mueller, an adviser at Engel & Völkers San Francisco.
So how can a 20- or 30-something save up that amount? Heck, how can anyone?
“A lot of [buyers here are] software engineers, so they get paid well and can make that money on their own,” Mueller says. But she concedes not everyone fits that category, and many are getting pushed farther out.
“A lot of younger buyers are moving over to Oakland," she notes. Or farther out, to Vallejo or even Sacramento.
But the Bay Area isn’t the only part of California where prices—and down payments—are exploding. In this month’s realtor.com ranking of the hottest real estate markets, 13 of the top 20 housing markets were in the Golden State.
The typical down payment in Los Angeles was 17.9%, ranking third on our list. Meanwhile, in San Diego, where home prices have been climbing steadily, the average down payment was 15.9%. The Southern California city was the fifth-highest in our rankings.
Trend No. 2: New York is even more unique than you thought
There are a few things to learn if you move to New York City. Don’t get into an empty subway car (you’ll never do it twice). Queens has great ethnic eats. Times Square should be avoided like bubonic plague unless you’re seeing "Hamilton" (again). And if you buy a home, you’re going to have to pony up an ungodly amount of cash. Or not, if you’re willing to move to the outskirts of the Big Apple.
Aerial view of city so nice they named it twice iStock
Still with us?
Manhattan is the most expensive single county in America to buy a home. The median price here is $2 million, and the average down payment is 29.7%. A 40% down payment is hardly unusual, and multimillion-dollar, all-cash offers barely cause a stir. In Brooklyn, the average down payment is 22.4%; in can’t-get-no-respect Staten Island, it’s 21.9%.
So New York City should top our ranking, right? It’s not even close. New Yorkers pay an average down payment of 15.2% in the metro area. That puts the City That Never Sleeps in eighth place on our list.
The average is pulled down because the New York metro stretches far beyond Manhattan and the city. The metropolitan contains counties in Connecticut, New Jersey, and Pennsylvania. (Thank the U.S. Census Bureau for that definition.) The median home price for the entire metro is $492,000. And the counties outside the city limits helped to lower that figure. In New Jersey’s Sussex County, the average down payment was—get ready for it—just 9.9%.
Saving enough for a down payment here can be a struggle for even affluent residents, who pay some of the highest rents in the world. Gary Malin with City Habitats says buyers often reach it through a combination of sources: years of savings, help from relatives, and selling off other assets and investments.
But buyers who are open to buying outside the city don’t have to go through such an ordeal.
Alexandra Zendrian, 33, and her husband purchased a home in 2015 for around $370,000 in East Northport on Long Island, about an hour-and-a-half drive from Manhattan. The couple were able to do so with around a 4% down payment, which they saved up over two years by eating out less and putting their raises straight into the bank.
Similar to New York, No. 4–ranked Boston had much higher down payments near downtown. While the metro had an average of 16.3%, that figure was 17.8% in Suffolk County, which contains the city. Meanwhile, farther out in Strafford County, the average was 10.2%.
Trend No. 3: Bidding wars in Denver
After years of booming real estate, the home prices in Denver are about as high as the altitude (or the folks killing time outside the nearest legal marijuana dispensary). The median home price here is now $543,000. And that soaring market has resulted in a higher standard down payment, at an average of 15.2% over the past 12 months, ranking the Denver metro No. 7.
And it’s not just Denver. Colorado’s housing markets have some of the highest average down payments in the country, including Colorado Springs, at 19.2%, and Fort Collins, at 16.1%. But their populations were too small to make our ranking.
Sunset over Denver cityscape iStock
What stands out about Denver is that its down payments are higher than those of some of its fellow tech hubs on the West Coast. Portland, OR, ranked ninth, with an average down payment of 15%. Denver also ranked higher than Seattle, which has an even hotter home market and tech sector. Seattle ranked 10th, with an average of 13.6%. Sorry Jeff Bezos, you aren’t No. 1 on this ranking!
“If I have a buyer come to me, and all they have is 10% [saved up] and mediocre credit, I won’t even work with them,” says Allan VanInwegen, a real estate agent at HomeSmart Cherry Creek Properties in Denver.
There are a lot of folks here looking for homes. And in a market such as Denver, with tons of bidding wars, a higher down payment can be the thing that keeps you in the game, VanInwegen says.
Markets with the lowest down payment percentages
Phew, enough with the nosebleed down payments! Let’s look at some markets without exorbitant entry fees, shall we?
Trend No. 1: Loan programs keep down payments low
Military jets in the sky and naval ships off the coast are two signs that you’re in Virginia Beach, VA, a metro with one of the biggest military presences in the country.
That means there are lots of U.S. Department of Veterans Affairs home loans, available to active and former members of the military, which do not require down payments. And it shows up in the numbers: The average down payment in Virginia Beach was 6.8% over the past 12 months. That put the metro in our No. 1 spot for the lowest average down payment. Take that, California!
The Nauticus and the USS Wisconsin in Norfolk, VA iStock
“What ends up happening is that people are stationed here and decide to stay. They still have their VA eligibility,” says Barry Jenkins, a real estate agent in Virginia Beach. “That alone drives down the down payment numbers significantly.”
Buyers can also snag Federal Housing Administration mortgages, those government-backed 3.5% home loans. They might be scarce in markets with the highest home prices, but they’re common here—as they are in other housing markets with the lowest average down payments.
In the case of New Orleans, which ranked eighth lowest, with an average 9.6% down payment, it’s more than just federal loan programs keeping costs down. After Hurricane Katrina, local agencies expanded mortgage programs to help residents stay in the region. For example, the Finance Authority of New Orleans offers grants of 3% to 5% of the home loan to help buyers with down payments.
Trend No. 2: Lower-growth metros = lower down payments
As a housing market gets more competitive, buyers have to make sure their offers stand out—and that often means putting more cash on the table. But those factors don’t apply to some of the places with slower population and housing growth.
The figures put Cleveland at fourth for lowest down payments, with an average of 8.7%, and Rochester, NY, at fifth, with an average of 8.8%. They were two of the slowest-growing largest metros in the country in 2017, according to recent U.S. Census Bureau data.
Both metros have watched plants shut down and manufacturing jobs leave town. And as a result their housing markets took direct hits. But it’s worth noting that downtown areas in both cities have seen a resurgence in recent years.
Douglas Sacha/Getty Images
Many of the other metros that made our ranking have experienced some similar economic woes over the past decades. Or at least they haven’t experienced the same growth as the metros at the top of our list. They include Cincinnati (8.6%) at No. 2, San Antonio (8.6%) at No. 3, Memphis, TN (9.1%) at No. 6, and Columbus, OH (9.2%) at No. 7. Birmingham, AL (9.8%) ranked ninth, and St. Louis, MO (9.8%) came in at 10th.
Trend No. 3: Even in cheaper metros, you’ll need 20% down in some neighborhoods
Before you pack up your things and head to one of these low-low down payment housing metros, keep in mind that all neighborhoods aren’t equal. Buyers still often have to put down around 20% to purchase a home in the most desirable parts of town.
“I’ve had buyers looking for a condo [in downtown New Orleans] thinking they could qualify for the loan. But banks are like, ‘Hey, not for a condo there,’” says Anne Comara, a real estate broker at Engel & Völkers New Orleans. She says in sought-after neighborhoods such as the French Quarter and the Garden District, buyers can’t get a loan without a 20% down payment.
The French Quarter in New Orleans, LA iStock
In some of the more expensive neighborhoods in the Cincinnati region, such as Hyde Park and Indian Hill, the typical down payment is also closer to 20%, says Cincinnati-area real estate agent Stephanie Sudbrack-Busam of Sibcy Cline Realtors.
“Right now, it’s a very competitive market; multiple offers are common," Sudbrack-Busam says. With two equal offers, "one is a 5% [down payment] and one is 20%, [sellers] are going to take the higher one that has less risk."
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