US Cities with Astronomical Down Payment Costs
Average Down Payments
While there are signs that the housing market is beginning to cool, home prices are still significantly higher in many parts of the U.S. than before the COVID-19 pandemic. One of the side effects of these higher home prices is higher down payments.
To illustrate high down payments, LendingTree analyzed data from more than 960,000 users of our platform who lived in one of the nation’s largest metros and were offered a 30-year, fixed-rate mortgage from Jan. 1 to Oct. 10, 2022.
We found that homebuyers across the nation’s largest metros are putting tens of thousands of dollars, on average, toward their down payments. Even in areas where household incomes and loan amounts are relatively low, five-figure down payments are common.
Key findings
A down payment on a home across the nation’s 50 largest metros averages $62,611. For comparison, that amount is 35.3% higher than when LendingTree last published this study in September 2021, when the average down payment across the nation’s 50 largest metros was $46,283. While average down payments can vary significantly by location, no metro featured in our study’s 2022 update has an average of less than $38,000.
California is home to the three metros where down payments are highest — San Jose, San Francisco and Los Angeles. The average down payment in San Jose is $142,006. In San Francisco and Los Angeles, those figures are $131,631 and $104,749, respectively. These are the only metros in our study where average down payments top $100,000.
Oklahoma City, St. Louis and Virginia Beach, Va., are the metros with the lowest down payments. Down payments in these metros average $38,169, $40,113 and $40,530, respectively.
Across the nation’s 50 largest metros, the average down payment on a home equates to 58.3% of that area’s average yearly household income.
Down payments are the most affordable relative to income in St. Louis, Virginia Beach and Hartford, Conn. Across the three metros, homebuyers put 43.5% of their area’s average annual household income toward a down payment.
Los Angeles, San Diego and San Francisco are the metros where down payments are least affordable relative to income. Across the three metros, homebuyers put 83.4% of their area’s average annual household income toward a down payment.
15. Phoenix
Average down payment: $67,335
Average mortgage amount: $350,837
Average annual household income: $101,833
Average down payment as a percentage of average annual household income: 66.10%
14. Nashville
Average down payment: $68,405
Average mortgage amount: $335,047
Average annual household income: $102,346
Average down payment as a percentage of average annual household income: 66.80%
13. Raleigh, North Carolina
Average down payment: $69,165
Average mortgage amount: $349,396
Average annual household income: $111,834
Average down payment as a percentage of average annual household income: 61.80%
12. Portland
Average down payment: $71,214
Average mortgage amount: $380,792
Average annual household income: $109,491
Average down payment as a percentage of average annual household income: 65.00%
11. Austin, Texas
Average down payment: $74,250
Average mortgage amount: $375,347
Average annual household income: $115,863
Average down payment as a percentage of average annual household income: 64.10%
10. Sacramento, California
Average down payment: $74,457
Average mortgage amount: $399,823
Average annual household income: $110,692
Average down payment as a percentage of average annual household income: 67.30%
9. Denver
Average down payment: $76,943
Average mortgage amount: $403,431
Average annual household income: $119,562
Average down payment as a percentage of average annual household income: 64.40%
8. Washington, DC
Average down payment: $78,831
Average mortgage amount: $427,264
Average annual household income: $144,991
Average down payment as a percentage of average annual household income: 54.40%
7. Boston
Average down payment: $81,510
Average mortgage amount: $428,985
Average annual household income: $137,675
Average down payment as a percentage of average annual household income: 59.20%
6. New York City
Average down payment: $88,195
Average mortgage amount: $398,757
Average annual household income: $125,563
Average down payment as a percentage of average annual household income: 70.20%
5. Seattle
Average down payment: $96,056
Average mortgage amount: $503,207
Average annual household income: $137,809
Average down payment as a percentage of average annual household income: 69.70%
4. San Diego, California
Average down payment: $98,593
Average mortgage amount: $516,240
Average annual household income: $121,451
Average down payment as a percentage of average annual household income: 81.20%
3. Los Angeles
Average down payment: $104,749
Average mortgage amount: $535,268
Average annual household income: $115,845
Average down payment as a percentage of average annual household income: 90.40%
2. San Francisco
Average down payment: $131,631
Average mortgage amount: $593,860
Average annual household income: $167,674
Average down payment as a percentage of average annual household income: 78.50%
To see the complete list go to LendingTree.com.
1. San Jose, California
Average down payment: $142,006
Average mortgage amount: $636,091
Average annual household income: $195,284
Average down payment as a percentage of average annual household income: 72.70%
What high down payments can mean for homebuyers
Higher down payments can severely impact would-be homebuyers depending on their situations.
For example, those who already own a home may need to plan to stay longer than they’d like while they save enough cash for a down payment. Or, if they sell their current house and make a profit, they might have to allocate more of that profit toward the down payment on a new home than in the past. Similarly, those who don’t own may need to rent for longer periods or resort to moving in with family to save more money.
High down payments aren’t necessarily bad news for those with ample cash on hand.
The more money a person can put down on a home, the more likely they will get approved for a mortgage and be offered a lower interest rate. As a result, a high down payment can provide more benefits than drawbacks in many instances for those who can afford it.
While large down payments can make homebuying more difficult for some, they can make the process easier — and potentially more affordable in the long term — for others.
Tips for coming up with a down payment
As our study makes clear, a down payment on a home can be costly — even in areas not known for high home prices. And while this can present a challenge to many homebuyers, the good news is that there are ways to make coming up with enough money for a down payment a little bit easier. Here are three tips for coming up with a down payment:
Save, save, save. Generally, the more time you give yourself to save for a down payment, the better. Of course, saving can be difficult, especially with high inflation. But doing things like eating out less often or taking fewer vacations could help you build up a significant amount of money over time.
Consider different loan options. While a 20% down payment may be ideal, various loan options require less upfront cash. For example, Federal Housing Administration (FHA) loans require a down payment of as low as 3.5%. Keep in mind, however, that while finding a way to reduce a down payment can make it easier for someone to purchase a home, a smaller down payment will result in a higher mortgage amount and potentially even a higher interest rate. That means that a homebuyer’s monthly payments could be more expensive.
Look into down payment assistance programs. In some instances, you may qualify for help from a down payment assistance program. These programs can provide grant money or other discounts that make a down payment more affordable.
Methodology
LendingTree researchers analyzed data for the nation’s 50 largest metropolitan statistical areas (MSAs) to determine the average down payment in each metro.
Down payment data is derived from 30-year, fixed-rate mortgages offered to more than 960,000 LendingTree users from Jan. 1, 2022, to Oct. 10, 2022.
Average annual household income data comes from the U.S. Census Bureau 2021 American Community Survey with one-year estimates — the latest available.
This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.
