As mortgage rates rise, buying a home has become more challenging. Simply finding the money for a down payment can seem like an overwhelming task.
Recently, Zillow surveyed more than 6,500 homebuyers and asked them how they are coming up with a down payment in this era of rising mortgage rates.
Here are the top ways they identified.
1. Save it up over time
Mortgage homebuyers who tapped this source to finance their down payment: 75%
Half of the homebuyers in today’s market are purchasing a home for the first time, according to Zillow. That percentage has jumped from 37% in 2021 and is the highest Zillow has ever recorded.
Many of these first-time homebuyers have little choice but to save the money for a down payment dollar by dollar. The average homebuyer now needs nearly 12 years to save for a down payment — a big mountain to climb.
2. From the sale of their previous home
Mortgage homebuyers who tapped this source to finance their down payment: 46%
Traditionally, first-time homebuyers have purchased a starter home and allowed equity to build over a number of years. Later, they have used that equity to purchase another, often bigger home.
Many of today’s homebuyers appear to be using this tried-and-true method for cobbling together a down payment.
3. Gifts from family and/or friends
Mortgage homebuyers who tapped this source to finance their down payment: 39%
Parents, grandparents and other loved ones have a long history of pitching in when first-time homebuyers need help with a down payment.
Nearly 4 in 10 of today’s homebuyers say they have benefited from such generosity.
Other sources of funding
Other common ways that Zillow found today’s homebuyers are coming up with a down payment are:
- Selling stocks or other investments: 35%
- Borrowing from family or friends: 33%
- Tapping retirement funds: 32%
If you are in the market for a new home, stop by Money Talks News’ Solutions Center and search for a great mortgage rate.