Average down payments in the country’s 50 biggest metros have grown by more than 35% over the past year despite relatively stagnant wage growth and an economy rattled by runaway inflation. San Jose, California topped the list of the 5 U.S. metros home to the highest down payments with a hefty $142,006 average, followed by three other California metros: San Francisco, Los Angeles, and San Diego, where down payments average $131,631, $104,749, and $98,593, respectively.
In a housing market defined by fast-rising mortgage rates, higher down payments can actually help homeowners in the long term by keeping costs low overall, but as rates continue to rise alongside historically high home prices, prospective buyers are struggling to afford larger upfront costs, CNBC reports.
“In general, the more you can afford to put down, the lower your ultimate costs are going to be,” said [Keith] Gumbinger.
A larger down payment means a smaller mortgage, which can “certainly help offset the cost of rising interest rates to a degree,” he said.
While certain kinds of mortgages allow down payments as low as 3%, you’ll have to pay mortgage insurance on loans with less than 20% down, and you may see higher interest rates, Gumbinger said.
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