Lingering myths about financing and the homebuying process headlined findings published Tuesday from a recent servicing survey conducted by New American Funding (NAF).
More than 1 in 10 homebuyers (13%) thought they had to have a downpayment of at least 20%, while 1 in 10 homebuyers also did not realize they could negotiate with sellers.
About 17% of Gen Z respondents reported believing the 20% downpayment myth, compared with 11.6% of baby boomers. But as purchase affordability barriers remain entrenched this spring, borrowers should be instructed by originators of all money-saving strategies, the report indicated.
To that end, roughly one-fifth of respondents expressed wishing they had known about downpayment assistance programs earlier in the buying process. NAF collected responses from more than 1,000 homeowners in November and December.
Mortgage borrowing costs have increased sharply in recent weeks amid the ongoing Iran war. The report highlighted, however, how downpayment barriers in particular may be holding back homebuyers.
Rapid home-price appreciation in recent years has caused downpayment amounts to skyrocket, fueling a housing access divide favoring buyers with greater access to cash, such as higher-income borrowers, repeat buyers and single-family investors.
Younger and first-time homebuyers lacking the equity transfer from a simultaneous sale typically feel the downpayment spike more acutely. Nevertheless, locating the “right home” at the right price was the most challenging part for the homebuying process for 44% of respondents, making affordability the top challenge reported.
Roughly one-third of Gen Z and millennial respondents reported receiving financial help from family and friends, though 71.7% of recent homeowners reported receiving zero financial assistance from friends or relatives.
At 17.7%, the South had the highest share of buyers who reported using 0% downpayments, compared to 7.4% in the Northeast, 9.7% in the Midwest and 13.4% in the West.
Homeowners in the Northeast received the most financial help from family and friends, with 32.1% of respondents from that region getting up to 20% of the sale price.
Ultimately, the survey’s findings underscore that homebuyers continue to find the costs of homeownership higher than anticipated. Maintenance and repair costs were higher than expected for 37.2% of respondents, followed by property taxes (25.4%) and utility bills (22.3%).
The actual cost of homeownership was higher than anticipated for about 17.1% of buyers, while 72.9% of respondents said they would buy the same home if they could do it again.
