NAR economist encourages brokers to guide first-time buyers who might be listening to the wrong sources
Affordability has been a challenge over the past few months, making it even more difficult for homebuyers to save for a down payment, especially first-time buyers. One national economist wants those buyers to understand that they may not need as much down as they think.
Jessica Lautz (pictured top), deputy chief economist and vice president of research at the National Association of Realtors (NAR), noted that many home buyers are turning to family members for mortgage advice rather than a mortgage professional.
Lautz believes this is one of the reasons that so many potential homebuyers believe a 20% down payment is a requirement.
“Our survey shows that 97% of members are saying that they're working with a client who's consulting family members for advice,” Lautz told Mortgage Professional America. “And that advice could be outdated advice, it could be inaccurate advice. You want (them) to really talk to the experts in this sector.
“What we know about successful homebuyers is that they found the pathway there, and it's a different pathway than perhaps the advice they're getting.”
Affordability challenges
At a time when the median home price nationwide is over $400,000, the idea of having to save 20% of that amount could deter buyers from even considering purchasing a home. This is especially challenging due to the day-to-day affordability challenges that arise outside of the homebuying process.
“It's very hard to save for that 20% down in many areas of this country when we know nationwide, the median home price is more than $400,000,” Lautz said. “But in some areas, we're talking about a million or even $2 million. Saving for 20% down would be completely out of reach for the typical American.”
The weight of frustration is even greater for first-time homebuyers, who may not have had time to save a sizable down payment. The reality, according to the NAR survey, is that the average down payment for first-time homebuyers was just 9%, less than half of the 20% they might think they need.
“When we look at successful first-time homebuyers, they're getting in with that typical down payment of 9%,” she said. “So just knowing that data could make that potential homebuyer say, ‘Oh, maybe this is within reach to me,’ as opposed to feeling deflated when you think about those outdated numbers.”
Another interesting note from the NAR report is where first-time homebuyers are getting the money for their down payments. The report notes that, with the average first-time buyer now at an all-time high of 38 years old, asking family for help in buying a home might not be an option.
First-time buyers are using a variety of sources. Savings make up 69% of first-time buyers' down payments, with gifts or loans from friends and family at 25%, financial assets at 21%, and inheritance at 7%.
“They're probably not just using one down payment source,” Lautz said. “They may have saved for an extensive period of time, but they also may have gotten a gift or a loan from their friends or family, and then at the same time, perhaps a great uncle has passed away and left them a little nest egg as well. And they could be using things like financial assets, perhaps the tax refund, or other sources.
“Pooling together all those sources is a way to scrape together that down payment for potential first-time homebuyers.”
One financial asset that first-time buyers are using is cryptocurrency. While Lautz noted it was still a small percentage of down payments, with Fannie Mae and Freddie Mac set to accept crypto in mortgages soon, that percentage may increase.
“We've been hearing this anecdotally for years from realtors,” she said. “I would say the last three or four years that we have heard of some buyers are using this as a gateway into home ownership, and so with broadly allowing that to happen, I think that this could be a quicker pathway for some young adults to get there.”
Education is key
Lautz encourages mortgage brokers to continue educating clients, especially first-time buyers, to explore all types of loans to find options for smaller down payments.
“I think the big thing is that there's a lack of awareness of low down payment programs,” Lautz said. “Educating potential buyers on that could bring new clients. “
She also noted that first-time buyers often don’t take advantage of down payment assistance programs, which can help bridge the gap between what they have saved and what they need to get a home.
Affordability challenges for first-time homebuyers underscore the need for professional advice, says Michael Brennan, President of Nationwide Mortgage Bankers (NMB). He believes the industry has shifted to a trusted advisor role. https://t.co/IRNtu98WoM
— Mortgage Professional America Magazine (@MPAMagazineUS) June 25, 2025
“Those programs are not underutilized, but the awareness of those programs is very low among potential buyers,” she said. “Seeing if you could qualify for any state or local programs, not just the broad national programs or FHA or VA loans, is absolutely worth a potential buyer's time to educate themselves on that.”
The NAR data showed just 52% of first-time homebuyers used a conventional mortgage, compared to 73% of repeat buyers. A combined 38% of first-time buyers used FHA and VA loans, compared to 21% of repeat customers.
Lautz echoed the sentiments of many mortgage brokers that now is a good time to look to buy a home. With rates flattening a bit, and extra housing inventory on the market, buyers may be able to find a good deal before rate cuts might flood the market with buyers.
“I think this is a sweet spot for potential first-time homebuyers,” Lautz said. “Because we know the market is lower than it has been in the last few years. We also know that there's more inventory coming into the market, and mortgage interest rates have been pretty flat. They've been flat in the mid-6s for more than 20 weeks, and so that consistency could allow a potential first-time homebuyer who's on good financial footing to actually start shopping for a home.
“And knowing about these programs, could really build on clientele in the mortgage market, certainly, but also could bring more people into home ownership.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
