IRVINE, Calif.–The lack of a down payment on a home is frequently cited as the reason many people, especially Millennials, are not able to purchase a house.
But analysis by Realty Trac has found that despite there being close to 2,500 mostly local down payment assistance programs in the country, there is low awareness of the programs by borrowers and real estate agents alike. RealtyTrac said that its survey of 513 counties found that buyers using available down-payment assistance programs could save an average of $17,766 in both down payment costs and interest savings.
The total savings breaks down to an average savings of $5,965 on the down payment for a median-priced home, and an average savings of $11,801 on monthly house payments over the life of the loan for a median-priced home, according to RealtyTrac.
“Saving for a down payment can be difficult for prospective first-time home-buyers given the absence of substantial wage growth in recent years combined with the burden of student loan debt many are struggling under,” said Daren Blomquist, senior vice president at RealtyTrac, in a statement. “Even just a 3% down payment requires 14% of annual wages on average across the 513 counties we analyzed, and in 67 counties a 3% down payment requires more than one-fifth of annual wages.”
On average, the amount of down payment assistance in 2016 was $12,434, up from an average of $11,565 in the counties analyzed by the RealtyTrac in 2015.
For example, the company noted on a $250,000 home with a 3% down payment of $7,500, the closing costs for the buyer could typically add up to another $13,000, once costs such as loan origination fees, broker’s commission, title, recording and transfer taxes were factored in. But a down payment program could lower the closing costs to just $200.
One of the challenges, reported RealtyTrac and Down Payment Resource, is that few buyers and agents know about possible assistance. The companies cited a 2014 NeighborWorks America research study that found 70% of American adults don’t know the programs exist. NeighborWorks reported said that its affiliates alone helped secure $100 million in funding available for down payment assistance for 6,000 homeowners in 2013, an average amount of $16,700 per home buyer.
According to RealtyTrac, markets where buyers using down payment assistance programs can realize the biggest total dollar savings compared with buyers not using down payment assistance were Kauai County, Hawaii ($80,148 total savings over the life of the loan); Placer County, Calif. ($78,539); San Francisco County, Calif. ($77,411); Orange County, Calif. ($74,268); and Shasta County (Redding), Calif. ($70,806).
Other markets with total savings of more than $50,000 over the life of the loan included counties in Miami, New Orleans, Seattle, Orlando, and New York, RealtyTrac said.