Economists' Outlook

Housing stats and analysis from NAR's research experts.

The Down Payment Challenge and the Typical Renter

Tight credit characterizes the current housing environment. Buyers with large down payments are reported to have the bidding edge for houses. However, 60 percent of first–time buyers made a down payment of 6 percent or less as of February 2014, according to the REALTORS® Confidence Index survey.

How much down payment can a typical renter put down? The chart shows the median savings of renters in 2013 ($12,568) versus the down payment for a median-priced home ($197,400) under down payment scenarios of 3.5%, 5%, 10%, and 20% plus an assumed 3 percent closing costs. The typical renter’s savings are substantially less than a hefty down payment plus the closing cost. For renters with less than perfect credit, the path towards home ownership grows steeper as the needed down payment increase in times of tight credit.

Renter HHs' Median Holdings 2013

What Does this Mean For REALTORS®?
The potential buyer typically looks to the REALTOR® for advice. An education on credit scores and financial priorities may be in order for some clients. Credit scores can increase—if the client focuses on financial basics. Some clients may need to hear this. In addition, knowledge of the lending requirements of a wide number of financial institutions may be helpful in getting a mortgage—particularly for the buyer with a less than perfect FICO score.

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