Short on Cash, More Buyers Turning to Family for Down Payment Help
2015-10-27Among households that bought a home in 2014, 25 percent of middle-income earners used family or friends for help with down payments. Only 15 percent of low-income and 16 percent of high-income earners got help for a down payment.
“Securing a down payment has always been one of the main hurdles younger buyers need to clear when transitioning to homeownership, and it’s gotten harder in recent years thanks in part to rising rents, high student debt and weak income growth,” said Zillow Chief Economist Svenja Gudell. “But younger Americans are finding ways to clear that hurdle by going to family and friends for help. What’s worrisome are the implications of growing inequality: the social networks supporting low-income buyers may not be able to provide adequate help, while higher-income buyers may not need help in the first place.”
First-time home buyers are most likely to rely on family and friends for down payment assistance. Rents are high, credit availability is tight, and many have huge amounts of student debt, making that first home purchase especially difficult because cash isn’t available from a previous home sale. Home values have increased as well, causing the down payment amount to rise along with it.
The “Bank of Mom and Dad” will continue to be an option for those struggling to save the 20 percent down that’s commonly needed for a home purchase, but there likely won’t be the same level of dependence as during the worst years of the recession.
To learn more about this study, check out the brief on Zillow Research.
Source:http://www.zillow.com/blog/family-down-payment-help-185637/
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