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Have you ever wondered how a friend or coworker your age managed to buy a home while you’re struggling just to keep up with your bills? The answer might be The Bank of Mom and Dad.
Last year, one in four first-time homebuyers used a gift or loan from family or friends to make their down payment, according to data from the National Association of RealtorsⓇ (NAR). And in some pre-pandemic years, it was an even higher proportion — about one in three.
Between 6%+ mortgage rates, steep post-pandemic property prices, and few starter homes to choose from, buying your first house or apartment can feel prohibitively expensive. The typical (median) down payment in the third quarter of this year was over $30,000, well over double the $13,900 it was six years ago, according to Realtor.com data. First-time buyers accounted for just 24% of all buyers last year — a historic low (and about half of the peak of 50% reached in 2010,) according to NAR.
So what? There’s no denying that help with the down payment can give first-time buyers a way into this challenging real estate market. But it’s become less common, maybe because a one-time cash infusion doesn’t change that mortgage rates are more than double what they were in 2021. (The increase in rates alone adds over $600 to the typical monthly mortgage payment on a $400,000 home.)
If a cash gift or loan is not an option for you, don’t lose hope. Here are some reasons to feel more positive as a prospective first-time buyer:
• It’s becoming more of a buyer’s market. Homes are sitting on the market for longer, sellers are cutting prices and adding concessions in many parts of the country, and the average 30-year mortgage rate is 6.27%, just about the lowest it’s been in a year.
• First-time buyers who don’t have help from their parents still buy homes eventually, according to a recent study by a Federal Reserve economist who examined data from 2009 and 2021. They are just around 2.5 years older than those who do, the economist found.
• If cash help isn’t in the cards, there are other ways you might be able to get help from your family: About 18% of Gen Zers and millennials surveyed by Redfin in May said they lived with family or friends in order to save money for their down payment.
• The Trump administration is reportedly weighing new measures to help tackle the high cost of homeownership.
• You don’t have to put 20% down. In 2024, the median down payment for first-time buyers was just 9%, NAR data shows.
Related Reading
One Answer to High Mortgage Rates: A Smaller Home (SoFi)
Will a Trump 'Housing Emergency' Mean a New First-Time Home Buyer Tax Credit? (Yahoo Finance)
Why Is the Number of First-Time US Homebuyers at a Generational Low? (The Guardian)
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