More than half of Americans say they would prefer to put 10 percent down on a home purchase rather than 15 percent, 20 percent, or 30 percent, according to mortgage banker American Financing’s 2017 Mortgages in America Survey. The 10 percent down payment option was the lowest among the choices respondents were given in the survey. It also was the most popular choice across generational divides, including millennials, Generation Xers, and baby boomers.
The average down payment on a home purchase in 2016 was 11 percent, according to the National Association of REALTORS®’ 2017 Aspiring Home Buyers Profile. Borrowers under the age of 35 put down an average of 8 percent, according to NAR’s report.
Many respondents to American Financing’s survey acknowledge that they do not fully understand the basics of how mortgages work. Nearly a quarter—primarily millennials—say they lack understanding about interest rates and private mortgage insurance. Further, “while affordable programs allowing a 10 percent down payment are available and provide an attractive option to prospective home buyers, it’s important to consider other factors, like private mortgage insurance, which can play a significant role in the overall cost of a home,” says Carrie Niess, business analyst at American Financing. “For instance, the lower the down payment, the higher private mortgage insurance costs can run.”
Some additional findings from the study:
- Renting vs. homeownership: Consumers overall indicate that an increase in rental rates would motivate them to move. Forty percents say an increase of less than $100 per month in rent would motivate them to move, and another 37 percent say the same about an increase between $101 and $300 per month.
- Mortgage preferences: Millennials and Gen Xers show preference for a 30-year fixed-rate mortgage, while baby boomers favor a 15-year mortgage.
- Marital status: Respondents who are married (37 percent) say they are most likely to buy a home in one to two years, while those who are single (41 percent) say they are likely to wait five years before purchasing.
Source: “The Mortgages in America Survey,” American Financing (2017)