{"id":860724,"date":"2025-06-16T08:03:53","date_gmt":"2025-06-16T12:03:53","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/homebuyers-down-payments-are-shrinking-for-the-first-time-in-almost-two-years-as-housing-market-cools\/"},"modified":"2025-06-16T08:03:53","modified_gmt":"2025-06-16T12:03:53","slug":"homebuyers-down-payments-are-shrinking-for-the-first-time-in-almost-two-years-as-housing-market-cools","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/homebuyers-down-payments-are-shrinking-for-the-first-time-in-almost-two-years-as-housing-market-cools\/","title":{"rendered":"Homebuyers\u2019 Down Payments Are Shrinking for the First Time in Almost Two Years as Housing Market Cools"},"content":{"rendered":"

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Homebuyers\u2019 Down Payments Are Shrinking for the First Time in Almost Two Years as Housing Market Cools<\/b><\/p>\n

Redfin reports FHA and VA loans are becoming more common: Just over 15% of mortgaged homebuyers use an FHA loan, and just over 7% use a VA loan, up from last year<\/i><\/p>\n

SEATTLE–(BUSINESS WIRE<\/a>)–
\n(NASDAQ: RDFN) \u2014The typical U.S. homebuyer\u2019s down payment is $62,468, down by roughly 1% year over year, the first annual decline in nearly two years. That\u2019s according to a new report<\/a> from Redfin (redfin.com<\/a>), the technology-powered real estate brokerage.<\/p>\n

\nRedfin\u2019s report is based on its analysis of county records across 40 of the most populous U.S. metropolitan areas. April 2025 is the most recent month for which data is available.<\/p>\n

\nIn percentage terms<\/i>, the typical U.S. homebuyer puts down 15% of the purchase price, essentially unchanged from 15.1% a year earlier.<\/p>\n

\nThe median U.S. down payment has been around 15% for the last four years, dipping into the 10% range in early 2023. Before the pandemic, the typical down payment was around 10%.<\/p>\n

\nThe last time dollar-amount down payments fell year over year was in summer 2023, when home-sale prices were falling. At that time, the decline in home prices was the main reason down payments were falling: when prices are lower, the percentage buyers put down is lower. Now, home prices are rising; they increased 1.4%<\/a> year over year in April. But home-price growth is slowing: for comparison, prices were up roughly 4% at this time in 2024. Slowing price growth is one contributor to lower down payments.<\/p>\n

\nDown payments are falling in dollar terms even though overall home prices are rising slightly because not all homebuyers make a down payment; nearly one-third of buyers pay in all cash. It\u2019s likely that the people buying homes with a mortgage bought cheaper homes, reducing down payments. That also explains why down payments stayed flat in percentage terms but declined in dollar <\/i>terms.<\/p>\n

\nAdditionally, a slightly higher share of homebuyers are using FHA and VA loans, which require lower down payments. That can push down-payment dollar amounts down.<\/p>\n

\nMortgaged homebuyers are likely purchasing cheaper homes because of affordability challenges: mortgage rates are near 7%, more than double pandemic-era lows, meaning people are ultra-sensitive to cost. Additionally, there\u2019s an air of economic uncertainty in the U.S.; some house hunters taking out a mortgage may be seeking out cheaper homes so they have more money in their bank account for security.<\/p>\n

\nThe overall housing market has cooled, with home sellers outnumbering buyers and the market shifting in buyers\u2019 favor. Sellers in much of the country are willing to negotiate with buyers and give concessions<\/a>. Some may also be willing to accept lower down payments\u2014which may signal less financial security and a higher chance of the deal falling through\u2014to offload their home.<\/p>\n

\n\u201cThe buyers who are moving forward today are being very careful with their finances because, with housing costs near record highs, they\u2019re typically spending a big portion of their paycheck to buy a home. I\u2019m seeing an uptick in first-time buyers looking for starter homes,\u201d said Fernanda Kriese<\/a>, a Redfin Premier<\/a> agent in Las Vegas. \u201cCombine that with concerns about layoffs and a potential recession, and people are doing things like cross-comparing mortgage origination fees, shopping around for lenders, and looking into down-payment assistance.\u201d<\/p>\n

FHA and VA Loans Are More Common Than Last Year<\/b><\/p>\n

\nRoughly one of every seven (15.3%) mortgaged sales used an FHA loan in April, up from 14.2% a year earlier.<\/p>\n

\nThe share of mortgaged home sales using a VA loan was 7.2%. That\u2019s the highest April level since 2020, and up from 6.4% a year earlier.<\/p>\n

\nMore homebuyers are using FHA and VA loans now than a year ago\u2014and more buyers are using VA loans than any spring since 2020\u2014because it\u2019s a buyer\u2019s market in much of the country. That means buyers are more likely to get an offer using an FHA or VA loan accepted; in an ultra-competitive market, such as in 2021 and early 2022, the market favors buyers with higher down payments and more ability to prove their financial security.<\/p>\n

\nConventional loans are the most common type of mortgage, by far. Nearly eight in 10 (77.5%) of home loans were conventional in April.<\/p>\n

31% of Home Purchases Are All Cash, Little Changed From a Year Ago<\/b><\/p>\n

\nJust under one in three (30.7%) home sales were all cash in April, down slightly from 31.6% a year earlier.<\/p>\n

\nThe share of buyers paying in cash peaked at nearly 35% in 2023 because mortgage rates peaked at nearly 8% during that time. Buyers were inclined to pay in cash\u2014if they could afford it\u2014in an attempt to avoid high monthly interest payments.<\/p>\n

\nMortgage rates are now in the high-6% range, slightly pushing down the share of buyers paying in cash.<\/p>\n

Metro-Level Highlights<\/b><\/p>\n

The data below is from April 2025, the most recent month for which data is available, and covers 40 of the most populous U.S. metros.<\/i><\/p>\n