A new survey from Bankrate found that primary reason 29 percent of renters can’t buy a home is they can’t afford a down payment. However, at least one out of five of them are overestimating how much they think they will have to raise for a down payment.
The more than 3250 non-homeowners participating in the survey expect that they would have to put down 24 percent of the purchase price. Some 21 percent of those non-owners, or one in every five of those who think they can’t afford a down payment, believe they would have to put down more than 20 percent of a home’s price.
In fact, the average down payment last year was nearly ten points lower, about 14.8 percent of the purchase price, according to RealtyTrac. Millennials, many of whom use FHA financing or the new low down payment programs from Fannie Mae and Freddie Mac, put only about 7 percent down, according to an NAR report on Millennials.
NAR’s 2015 Profile of Home Buyers and Sellers reported virtually the same down payment levels. First-time buyers financed 94 percent of their homes and put down 6 percent; repeat buyers financed 86 percent and paid the remaining 14 percent in cash.
Even the average down payment for just conventional loans was lower than the 24 percent average of renters in the Bankrate survey- 17.36%, according to a Lending Tree.
The Bankrate study raised eyebrows when it reported that the survey found that 35 percent of non-homeowners “just don’t want to own a home yet”. However, the real news may be the rampant and harmful misinformation about down payments that it has surfaced.
A little education about down payments might change the minds of the renters who are putting off homeownership because they have wrong information. Based on the survey, that works out to about 6 percent of the 43 million renting households in the nation, or 2.5 million households that would like to buy a home but are still trapped in apartments as their rents rise at record rates.
Those 2.5 million households are the equivalent of slightly less than half the number of homes sold in the US last year. In other words, getting out the right information about down payments could potentially increase annual home sales by 50 percent.