NAR Report Shows How Buyers Finance Homes and Down Payments
Written By: Joel Palmer, Op-Ed Writer
Mortgage processors and underwriters who want to better understand their customers may want to check out the 2019 Profile of Home Buyers and Sellers.
The report was released last week by the National Association of Realtors, which produces this yearly report on the demographics, preferences and experiences of buyers and sellers.
Regarding how buyers finance their home purchased, the report stated:
86 percent of recent buyers financed their home purchase. Those who financed their home purchase typically financed 88 percent of the purchase price.
First-time buyers who financed their home typically financed 94 percent of their home compared to repeat buyers at 84 percent.
In 2019, the median down payment was 12 percent for all buyers, 6 percent for first-time buyers, and 16 percent for repeat buyers. Lower down payments among home buyers are another result of rising home prices as buyers find it difficult to save for a down payment.
For 60 percent of buyers, the source of the downpayment came from their savings. Another 38 percent of buyers used the proceeds from the sale of a primary residence.
17 percent of all buyers and 25 percent of first-time buyers used an FHA loan to purchase, likely taking advantage of low down payment programs.
31 percent of buyers said obtaining a mortgage “was more difficult than expected.”
The report also noted that first-time buyers accounted for 33 percent of purchases this year, which is down from the historic norm of 40 percent.
In addition, a third of first-time buyers used a gift from family or friends to finance the requisite downpayment.
“Prerecession, the number of first-time buyers was higher, in part, because buyers had more options,” said NAR President John Smaby. “However, over the past few years, we have unfortunately experienced a scarcity in housing inventory, especially at the middle- and lower-end of the market.”
“Low inventory conditions hurt would-be first-time buyers most,” added NAR chief economist Lawrence Yun. “Their homeownership dream and the opportunity to build wealth gets delayed until more inventory choices reach the market.”
Additional statistics about recent home buyers include:
The typical buyer was 47 years old this year.
The median household income for purchases in 2018 rose to $93,200.
12 percent of home buyers purchased a multi-generational home, to take care of aging parents, because of children over the age of 18 moving back home, and for cost-saving.
20 percent of recent home buyers were veterans and 3 percent were active-duty service members.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
