Couple sitting in new home with keys and packed boxes.

Are Down Payments Hindering First-Time Home Buyers? And How You Can Educate Your Audience

4 minute-readMay 03, 2022


Owning a home is an incredibly worthwhile and rewarding experience but for many the dream of owning their own home gets further and further away as home values and interest rates increase. To get a better understanding of the challenges potential buyers face in today’s market, Rocket Homes℠ conducted a survey and it was no surprise that down payment and closing costs were among the top reasons for contributors not planning to buy a home soon.

As real estate agents we can’t force the market to accommodate our clients. But we can educate our audience and do our best to present them with real opportunities in real estate to get them to their home ownership goals. We’ll discuss some of the barriers buyers face in today’s market and offer some tips to help you and your clients get to the closing table.

Barriers to Buying

For many would-be homeowners, the down payment remains a significant barrier to homeownership. When asked to choose all the factors that were keeping them from purchasing a home, 38.5% of non-homeowners said, “down payment or closing costs.” Current homeowners have enjoyed accelerated growth in their home’s equity the past few years and are better equipped to enter a competitive market with strong bargaining tools at their disposal. With their savings and their home’s equity as down payment backing up their search for a new home, current homeowners have the upper hand.

That’s why it’s important to understand your client’s home purchase budget and develop a strategy they are comfortable with and can afford. In a competitive market a first-time home buyer will likely be involved in a multi-offer situation. The more time you spend preparing them for the inevitable dips and turns of buying a home, the better your client will be at making swift, educated, confident decisions during the home purchase process.

How Much Do Buyers Plan to Put Down

Traditional advice tells potential home buyers they need to save 20% of their home’s value as down payment. For reference, a 20% down payment on a $322,692 house (the median sales price in December 2021) is nearly $65,000. The same buyer could qualify for an FHA loan that would require a 3% down payment, or just under $10,000, a far more affordable option for most Americans.

Of those surveyed who are in the process of getting a mortgage or plan to get a mortgage in the future:

  • 4% plan to make a down payment between 1% - 5%
  • 8 % plan to put down 6% - 10%
  • 6% plan to make larger down payments between 11% - 20%

With median home prices the highest they’ve been in recent history, home buyers with smaller budgets have a natural advantage when it comes to their home’s down payment. 47.3% of those surveyed who said they were looking for a home reported their home buying budget was between $100,000 - $199,999. In this range, a 3% down payment would fall somewhere between $3,000 - $6,000.

Keeping your clients search focused with in this starter home range can make getting their foot in the door of homeownership a little easier. You can also rest easy knowing your client can comfortably afford their new home.

Affordable Loans for First Time Home Buyers

For those buyers with concerns about the upfront costs of buying a home, there are affordable options that could have them packing before they know it. Government backed loans are an affordable option for cash strapped buyers. Government backed loans are insured by the government, meaning they pose less risk to a lender. Because of the lower risk, lenders can offer borrowers low down payment options and affordable interest rates.


FHA loans are backed by the Federal Housing Administration, an agency under the jurisdiction of the Department of Housing and Urban Development. FHA loans are insured by the FHA, which means this organization protects lenders against loss when borrowers default on their home loan. FHA loans are available with low down payment options and have a lower minimum credit score requirement than conventional loans.


A USDA home loan is a competitively priced mortgage option that helps make purchasing a home more affordable for lower income individuals living in designated rural areas. The U.S. Department of Agriculture backs USDA loans. This government backing means, they can offer borrowers lower interest rates and low down payment options. Some borrowers that qualify for a USDA loan can purchase a home with no down payment, but they’ll still need to pay closing costs. 

VA Loans

A VA loan is a mortgage option for people who meet the VA’s guidelines for military service. VA loans are guaranteed by the Department of Veterans Affairs, and in most cases a borrower would be approved by a private lender or mortgage company.

For borrowers who qualify, the upfront costs are much lower and in some circumstances a home can be purchased with zero down, but the borrower will still need money for closing costs. VA loans do not require mortgage insurance and often have much lower interest rates than conventional loans.

The Bottom Line: Keep Them Informed

When it comes to real estate, communication is key. Many Americans start saving for a home long before they reach out to a lender or real estate agent. While its ideal for your client to have a big down payment for a home, some people saving for a down payment don’t realize the options they have available to them now.

If you have clients who feel their bank account is too light, let them know with government backed home loans borrowers can qualify for low down payment options that can get them into their new home sooner than later with affordable interest rates.

Want more tips and insight into today’s real estate market? Explore the Rocket ProSM Insights Learning Center for the latest real estate and housing updates.