Clare Losey

First-time homebuyers generally lack the money to make large down payments on a home. According to the Survey of Consumer Finances, the medi​an net worth of renters measured $6,300 in 2019. Meanwhile, U.S. Census Bureau data indicate that nearly half of all renters in the U.S. were younger than 30; an additional quarter were 30-44 years old. 

Lower wealth among first-time homebuyers lends itself to two trends: 

  1. First-time homebuyers make up a higher proportion of borrowers with federally backed mortgages (i.e., FHA and VA loans), which require lower down payments than conventional mortgages. The decline in the supply of lower-priced homes indicates the demand for federally backed mortgages will likely increase among first-time buyers.

  2. First-time buyers may rely on down payment assistance from governmental entities, eligible family members, and other sources to help with the down payment. The decline in the supply of lower-priced homes and expectations for sustained higher home price appreciation in the near-term indicate first-time homebuyers will increasingly rely on down payment assistance to attain homeownership.

In 2010, just over 30 percent of borrowers with FHA purchase mortgages used down-payment assistance. By 2020, that figure jumped to approximately 40 percent, of which cash gifts from eligible family members comprised the highest proportion (nearly 60 percent of total down payment assistance).

Meanwhile, the National Association of Realtors reported in 2020 that 24 percent of Millennial homeowners received down payment assistance from a parent or relative when purchasing a home.

What’s contributing to the uptick in down-payment assistance? Strong demand for homeownership and a declining supply of lower-priced homes, to begin with. Other factors include:

  • relatively stagnant income and wages,

  • rising rents,

  • student loan debt, and

  • medical and health care costs, all of which diminish the ability of households to save.​

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