The average down payment for 30-year fixed rate mortgages has dropped down to 15.73 percent of a home’s value in the third quarter of the year. According to LendingTree, the nation’s online lender exchange leader, 30-year fixed-rate mortgages fell 2.74 percent from the second quarter to 15.73 percent of the value of a home in the third quarter.
The ability to buy a home with less money down has become easier. Traditionally, a home loan requires the borrower to put down 20 percent of the home’s value. Therefore, a home valued at $300,000 would traditionally require a down payment of $60,000. Take into account the national average down payment amount of 15.73 percent means a down payment on a home valued at $300,000 would be $47,190. It is a difference of $12,810 that is necessary for a down payment on a home valued at $300,000. For many, that can be years worth of savings.
What has lead to the drop in average down payment amounts?
“Lenders are putting more focus on purchase mortgages and are adjusting minimum requirements to attract borrowers,” stated Doug Lebda, LendingTree founder and CEO. “With home values improving, the risk of borrowers defaulting on loans has decreased, giving lenders more confidence to lend with less cash down for qualified borrowers.”
With lender confidence comes more negotiable down payment amounts. Lenders would still prefer as much down as possible, but they are less strict and allowing borrowers to put down lower amounts in an attempt to secure more mortgage loans.
States with lowest and highest averages
The top five states with the lowest averages include Nebraska, South Dakota, Arkansas, Alabama, and Missouri. Nebraska tops the list with the lowest average down payment amount at 12.5 percent of a home’s value. Missouri ranked fifth with an average of 13.1 percent average down payments.
Here are the average down payment percentages for the lowest five states:
- Nebraska – 12.5%
- South Dakota – 12.8%
- Arkansas – 12.9%
- Alabama – 12.9%
- Missouri – 13.1%
New Jersey, California, New York, the District of Columbia, and Massachusetts are the states with the highest average down payment amounts. New Jersey leads the way with an average down payment amount of 18.8 percent. Massachusetts’ average down payment amount is at 17.5 percent.
Here are the average down payment percentages for the top five states:
- New Jersey – 18.8%
- California – 18.6%
- New York – 18%
- District of Columbia – 17.9%
- Massachusetts – 17.5%
Since the average down payment amount for homes have dropped, it can help prospective home buyers purchase property sooner rather than later. Without having to wait as long to save the conventional 20 percent of a home’s value to put as a down payment, many prospective home buyers can purchase a home a few years earlier than anticipated.
The downside is that in the long-run, home buyers will pay more in interest to lenders. However, many potential buyers do not mind paying a little more interest to secure a home.