Hopeful buyers in the United States would now need to put a down payment of nearly $128,000 to afford monthly mortgage payments on a median-priced home.
Typically, a 20% down payment for a house was enough for hopeful buyers to afford monthly payments. However, after home values rose by 45% since 2020, monthly mortgage payments also increased by 115%. This also leads to an increase in the down payment buyers are required to put down to afford the monthly payments. That is according to a new Zillow report.
Zillow analyzed the major metropolitan areas in the US to determine the down payment required to comfortably afford a typical home. In the report, "comfortably affordable" means a buyer would not need to spend more than 30% of the typical income on housing costs, including mortgage payments, property taxes, and insurance.
In the current housing market, Zillow noted that buyers earning the median income would need to put a down payment of $127,750, or 35.4%, to comfortably afford a typical US home.
"Down payments have always been important, but in the current market, where interest rates remain high and volatile and home values are stable or rising, boosting the amount you put down can make the difference between a home that's affordable and one that's not," Skylar Olsen, Zillow's chief economist, wrote in the report.
"In more expensive markets, where home values have long outpaced incomes, middle-income households need an even bigger down payment share on top of the bigger price tag," Olsen continued.
Where Buyers Would Need an Even Bigger Down Payment
In Los Angeles, a buyer earning the median income would need to put a down payment of $780,203, or 81.1%, to afford a typical home and monthly mortgage payments. That is the highest down payment required in the country.
In San Jose, buyers would need a down payment of 80.9% or $1.3 million. That is "more than the typical home is worth in every other major market," the report noted.
Other housing markets where buyers earning median income would need to put a higher down payment include New York City, 75.3%; Miami, 64.5%; Boston, 61.7%; and Seattle, 61.3%.
