Dive Brief:

• Seven in 10 renters surveyed across 20 U.S. markets say they are unable to buy a home because they can’t afford the down payment, according to a new report from Zillow.

• Putting 20% down on a median-priced U.S. home requires more than two-thirds of median annual income, and it can cost nearly double that in the priciest markets.

• Other barriers to homeownership include existing debt, qualifying for a mortgage and a lack of job security. Still, 63% of renters surveyed want to purchase a home and 25% said they plan to do so in the next three to five years.

Dive Insight:

As home prices rise, lenders are responding to many renters’ inability to save up for a conventional 20% down payment with loan products that allow them to pay less up front, including smaller percentage shares and assistance such as matching grants. Citing data from the Mortgage Bankers Association, Realtor.com reported that the median down payment in 2016 was 10%, with first-time buyers putting down just 6%. 

With more millennials purchasing homes, the number of Federal Housing Administration–​backed mortgage loans is expected to increase. FHA loans, which offer smaller payments and accept lower credit scores, took more than one-third of the home loan market in February, up slightly from January.

Rising rents are another factor cutting into prospective buyers' ability to save up for a down payment. Zillow recently reported that U.S. renters would need to see income gains of at least $168 this year to keep up with expected rent increases, with the figure significantly higher in high-price markets. 

In some cases, rent fatigue and the threat of further mortgage rate increases, balanced by the presence of more flexible down-payment options, could encourage renters to purchase a home sooner. 

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