model house sitting on cash

The majority of consumers continue to mistakenly believe they need at least a 20% down payment to purchase a home, but the truth is the average down payment among all buyers is just 12%, according to National Association of REALTORS® data. Younger buyers tend to put down the least: For example, those between the ages of 22 and 30 put down an average of 6%, and those between the ages of 31 and 40 make an average 10% down payment.

NAR down payment chart

Financial experts often say a 20% down payment is ideal because it helps borrowers qualify for a mortgage and avoid the extra costs of private mortgage insurance. But it’s not always practical advice, especially as affordability dwindles. For example, a 20% down payment on an entry-level single-family home in the Los Angeles area could be between $200,000 and $400,000.

Several conventional lenders allow buyers to purchase a home with a down payment as low as 3%, while some government-backed programs like through the VA issue loans with no money down. Borrowers may find such options through FHA, USDA, or VA loans as well as down payment assistance programs.

Young adults, in particular, may be missing out on key information to move forward in the housing market. Two out of three recently surveyed say they are waiting for lower mortgage rates before starting the homebuying process, according to a survey of 1,000 millennials (ages 25 to 40) conducted by Lombardo Homes. However, economists have largely predicted that mortgage rates will edge upwards in the coming weeks. Further, one in four millennials underestimated their buying potential by $150,000 or more, the study finds.

Also, 59% of consumers say they did not know that the seller pays the real estate agents' commission, the Lombardo Homes survey shows. Respondents also expressed confusion about many real estate terms, such as earnest money, FRM (fixed-rate mortgage), and PITI (principal, interest, taxes, and insurance).

Real estate pros can educate buyers on common terms and financing resources. After all, home buyers of all ages are more likely to contact a real estate agent before a mortgage lender when they begin the homebuying process, according to NAR’s 2021 Home Buyers and Sellers Generational Trendspdf report.

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