downpayment sources

The Sources of Downpayments Among Different Buyer Types

Since 1997, the Profile of Home Buyers and Sellers has collected data on the sources of buyers’ downpayment for when they purchase a home. This year, 88 percent of all buyers financed their home and 98 percent of buyers ages 18 through 44 financed the home. All buyers financed a median of 90 percent of the mortgage and had a median downpayment of 10 percent. For first-time buyers, the median percent financed was 94 percent and they put down six percent. For repeat buyers, they financed 86 percent and put down a median of 14 percent.

In 2016, 61 percent of all buyers used savings for the downpayment, compared to 76 percent for first-time buyers and 53 percent of repeat buyers. Thirty-five percent of all buyers used the proceeds from the sale of a primary residence for the downpayment, compared to only two percent of first-time buyers (who may have inherited the home) and 52 percent of repeat buyers. Thirteen percent of all buyers used a gift from a relative or friend, 24 percent for first-time buyers, and eight percent for repeat buyers.

Comparatively in 1997, 70 percent of the downpayment for first-time buyers came from savings, none from the sale of another residence, and 25 percent as a gift from a friend or relative. Savings remained the number one source of the downpayment for first-time buyers over the course of two decades. In 2003, savings dropped to only 60 percent as a source of the downpayment and 61 percent in 2009, the two lowest points on the timeline. Savings was at a peak as a source of the downpayment in 2014 and 2015 when it hit 81 percent for first-time buyers. As for a gift from a friend of relative as the source of the downpayment, this share remained relatively flat over 20 years, dropping to to 22 percent in the mid-2000’s and up to 27 percent in the 2010’s. Proceeds from the sale of a primary residence remained small for first-time buyers, but grew slightly over the years to four percent from 2003 to 2007 and back down to two percent in 2016.

downpayment sources

 

For repeat buyers in 1997, 51 percent used savings for the downpayment and 52 percent used proceeds from the sale of a primary residence. In 2016, 53 percent used savings and 53 percent used the proceeds from the sale of a primary residence. Savings dipped to the mid-40 percentiles in the 2000’s for repeat buyers, getting as low as 40 percent in 2005 and 2006. In the 2010’s, it jumped up to the high-50th percentile hitting 59 percent in 2011 and 2012. Proceeds from the sale of a primary residence saw an inverse relationship over two decades, where is jumped up to the mid-60 percentiles in the 2000’s, reaching a high of 66 percent in 2005 as a source of the downpayment. In the 2010’s, it decreased to the low-40 percentiles for repeat buyers hitting 40 percent in 2012.

repeat downpayment

To follow this series as we discuss the findings of 35 years of profile data, check out the hashtag #NARHBSat35 on your social channels. NAR Research will be releasing trend line data since 1981 to celebrate 35 years of home buyer and seller demographic research.