Why so few first-time buyers? Down payment poses biggest challenge

With the U.S. homeownership rate near a half-century low, Zillow asked renters why they’re not buying.

The nearly unanimous answer: We can’t save up a down payment.

Nationally, 67.9 percent of renters say the down payment is a barrier to buying, followed by qualifying for a mortgage (cited by 53.2 percent of renters) and debt (50 percent). (Renters could choose more than one obstacle to blame.)

In South Florida, the down payment was cited by 45.7 percent of renters, qualifying for a mortgage was mentioned by 54.6 percent and debt was named by 45.4 percent.

“With home values close to record highs, it’s no surprise renters are concerned about coming up with enough money to buy a home,” said Zillow Chief Economist Svenja Gudell. “Rising rents are also a factor — it’s extremely difficult to save when you’re paying record-high rents.”

Gudell said she was surprised that renters are so focused on traditional 20 percent down payments — which, at Palm Beach County’s typical home price of $300,000, would require a $60,000 next egg.

Getting the best deal on a loan typically requires a 20 percent down payment, but a number of conventional mortgages now are available with as little as 3 percent down. Federal Housing Administration loans require just 3.5 percent down. The trade-off is a higher interest rate and hefty premiums for private mortgage insurance.

“Most people try to save up the conventional 20 percent, or maybe 15 percent, and they aren’t aware they can go so much lower,” Gudell said.

Other factors hampering homeownership include stagnant wages, student debt and a lack of low-priced homes for sale.

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