Homebuyers pay less upfront as buyers favor cheaper homes and low-down-payment loans
US homebuyers are putting less cash down on their purchases for the first time since summer 2023, even as property prices continue to edge higher, according to a new Redfin report.
In April, the typical down payment fell to $62,468, a 1% drop from a year earlier and the first annual drop in nearly two years.
While the median down payment remains roughly 15% of the purchase price, nearly unchanged from 15.1% in April 2024, the dollar value has dipped back to levels last seen before mortgage rates spiked in early 2023.
Redfin’s report, based on county records across 40 major US metros, noted that buyers are likely targeting lower-priced homes, contributing to the drop in dollar-value down payments.
“Mortgaged homebuyers are likely purchasing cheaper homes because of affordability challenges,” the report explained. “Mortgage rates are near 7%, more than double pandemic-era lows, meaning people are ultra-sensitive to cost.
“Additionally, there’s an air of economic uncertainty in the US. Some house hunters taking out a mortgage may be seeking out cheaper homes so they have more money in their bank account for security.”
Nearly one-third of buyers pay in all cash, Redfin noted. With cash buyers often targeting higher-end homes, mortgaged purchasers have gravitated toward more affordable properties, driving their average down payment lower even as overall home prices rose 1.4% year over year in April.
For context, price growth was closer to 4% at the same time last year, so slower appreciation is also weighing on down-payment amounts.
Affordability pressures have also sent some buyers hunting for starter homes and exploring lower-cost financing options. Roughly one in seven mortgaged sales (15.3%) used an FHA loan in April, up from 14.2% a year ago, while 7.2% relied on VA loans, the highest April share since 2020. Conventional mortgages remain dominant, accounting for 77.5% of home loans.
“The buyers who are moving forward today are being very careful with their finances because, with housing costs near record highs, they’re typically spending a big portion of their paycheck to buy a home,” said Las Vegas-based Redfin Premier agent Fernanda Kriese. “Combine that with concerns about layoffs and a potential recession, and people are doing things like cross-comparing mortgage origination fees, shopping around for lenders, and looking into down-payment assistance.”
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Cash purchases accounted for 30.7% of sales in April, down slightly from 31.6% a year earlier as mortgage rates eased from their late-2023 peak near 8% to the high-6% range.
Yet new data from real estate data firm Clever suggest lingering buyer unease: 30% of recent homebuyers say they’ve “felt in over their heads financially” since purchase, and 23% report that their overall financial situation has worsened.
Twenty-eight percent of buyers had second thoughts after their offers were accepted, with first-time buyers (51%) twice as likely to regret their purchase as repeat buyers (25%).
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