Buyers who use down payment assistance programs are saving an average of $17,766 over the life of the loan, according to a report released Thursday by RealtyTrac, a source for comprehensive housing data, and Down Payment Resource, a web-based software company with a mission to connect people with hard-to-find financial resources.
The report analyzed the impact of down payment assistance programs on the cost of buying a home, including the down payment and monthly house payments for a median-priced home in 513 counties nationwide. It was released at the National Association of Real Estate Editors 50th Annual Journalism Conference in New Orleans.
“Homeownership programs not only help buyers overcome the initial cost of purchasing a home, but also produce a compounding positive impact on the homeowner’s saving and wealth-building capability,” Down Payment Resource CEO Rob Chrane said.
“In fact, these programs are now the last frontier in the fight to preserve homeownership affordability,” Chrane said. “Rates are never going to be substantially lower, and home prices continue to trend higher.”
The savings comes from an average savings of $5,965 on the down payment, and about $11,801 on monthly house payments throughout the life of the loan.
“Saving for a down payment can be difficult for prospective first-time homebuyers given the absence of substantial wage growth in recent years combined with the burden of student loan debt many are struggling under,” RealtyTrac Senior Vice President Daren Blomquist.
“Even just a 3% down payment requires 14% of annual wages on average across the 513 counties we analyzed, and in 67 counties a 3 percent down payment requires more than one-fifth of annual wages,” Blomquist said.
Back in 2015, a joint analysis by RealtyTrac and Down Payment Resource showed that 87% of homes and condos would qualify for down payment assistance.
The market where down payment assistance programs cause the most savings is Kauai County, Hawaii at $80,148 total savings throughout the life of the loan. In second is Placer County, California in the Sacramento metro area at $78,539 followed by San Francisco County, California at $77,411, Orange County, California at $74,268 and Shasta County, California at $70,806.
This interactive map shows where down payment assistance makes the most difference in homeownership costs:
On the other hand, low inventory could be hurting these assistance programs. Pending home sales remain flat, according to the National Association of Realtors. But, it's not due to lack of demand, but rather the lack of decent product to sell.
“While down payment assistance programs are beneficial for assisting buyers in achieving the American Dream of homeownership, current low available housing inventory is creating an inability to leverage such programs to the benefit of buyers,” said Michael Mahon, president of HER Realtors, which covers the Cincinnati, Dayton and Columbus markets in Ohio.
“Couple current market conditions with certain sellers and agents restricting access to viewing of properties in consideration of marketing programs to create hyper-sensitivity regarding property availability, and we have what many are considering a potential environment of disparate impact relating to the inability of the Protected Class Buyers under the U.S. Fair Housing Act to leverage such down payment assistance programs in achieving their family goals of homeownership,” Mahon said.