Study: Down Payment Assistance Crucial to Homeownership for Many

A third of down payment assistance recipients say they’d never become homeowners without it
A mother and son paint a room blue.

Buying a home may be part of the American Dream, but a new study suggests that many consumers may need down payment assistance to be able to do so.

CBC Mortgage Agency, a federally chartered affordable housing agency, conducted a study to find out how important the role of down payment assistance is in the homebuying process. A down payment is the amount of money that homebuyers must pay upfront in order to take out a mortgage loan. CBC Mortgage Agency surveyed 735 lenders and 1,142 homebuyers who had utilized or received down payment assistance from Utah-based organization the Chenoa Fund to see what impact the assistance had.

An overwhelming 93% of homebuyer respondents said they would not have been able to buy their house when they did without the down payment aid. In fact, 35.9% said it would have taken them at least three more years to be able to buy a house without the assistance. Another 33.5% said they would never have been able to buy a house without down payment help.

The study’s results made it clear that making a down payment is the biggest obstacle to buying a home, rather than the ongoing costs of homeownership. In fact, 92% of survey respondents said they considered their mortgage to be affordable.

Certain groups may be more likely to seek out down payment assistance than others, as the study found that 54.3% of respondents described themselves as racial or ethnic minorities. Also, more than one-third of respondents —34.8% — who received down payment assistance reported being the first person in their family to become a homeowner.

Single parents were another group that seemed particularly reliant upon securing down payment assistance, the study found. In fact, 15.1% of respondents said that receiving down payment assistance was the only way they would be able to buy a house as a single parent.

Lenders who participated in the study anecdotally pointed out how down payment assistance has been particularly helpful to their clients who are saddled with student loan debt. For example, one lender, Jeffrey E. Nunley, told researchers that while his “clients have good jobs and have seen their income rise with the better economy…student loans and other debts continue to make it hard for them to save money to buy a home.”

If you are worried about saving up enough money for a down payment, the good news is that there are resources available. While many mortgage lenders require a 20% down payment, there are a lot of programs that let you buy a house with less money down. You might also benefit from other sources of down payment cash, such as gifts from family and friends or a loan from your retirement account. Finally, look for other ways to save money on the entire homebuying transaction. For example, negotiating lower closing costs could free up more money to use for a down payment.

Tamara E. Holmes

Tamara E. Holmes is a Washington, DC-based writer who covers personal finance, entrepreneurship and careers.