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Nearly half of all homebuyers are buying a home for the first time, according to the newly released Zillow Group Report on Consumer Housing Trends. However, financing a first-time home purchase continues to be a challenge.
Zillow determined that 56 percent of new homebuyers set aside savings to cover the costs of a downpayment, while one-third of buyers combined savings (both accumulated funds and cashed-in retirement funds) along with financial gifts and loans from family or friends to cover down payment costs. Finding an affordable home remains the most pressing concern for new homebuyers, according to Zillow, followed by downpayment costs.
Zillow estimated that a buyer must have $38,500 in cash in order to qualify and get the best mortgage terms for a $192,500 median-priced home. However, this figure is considerably larger in the more expensive housing markets—in San Jose, for example, a downpayment on the median $961,600 home is $192,320, even though the median income for that market is $105,455.
"Saving enough cash for a downpayment is a major barrier to homeownership, especially in expensive markets, where a 20 percent downpayment can cost nearly $200,000," said Zillow Chief Marketing Officer Jeremy Wacksman. "While it's possible to buy a house with a smaller downpayment, 20 percent ensures the best rates. As important as it is to find a monthly payment you can afford, some buyers' budgets will come down to the amount of cash they can bring to the table."