Picking the right house is just one of the big decisions you’ll face when buying property. Deciding on the down payment is another. Low inventory in some national markets continues to pressure potential buyers into making bigger down payments to gain a competitive edge. But the possibility of rate increases in the coming year and new rules on mortgage-interest deductions may also affect how much buyers put down.
The median down payment for financed home-purchases in the third quarter of 2017 was a record $20,000, or 7.6% of the median sales price of $263,000 according to Irvine, Calif.- based housing research firm Attom Data Solutions. That is up from 7.1% in the previous quarter and from 6.1% in the third quarter of 2016.
Down payments are even higher on purchases of luxury homes. In the third quarter of 2017, the median down payment on a financed home purchase over $1 million was $385,500, or 28.2% of the median sales price.
With the inventory of homes relatively low in many markets, a buyer is doing whatever it takes to compete. That means that in many purchase situations there are multiple offers, and the buyers who have the bigger down payment are more likely to win out.
It is expected that the 30-year fixed-rate mortgage rates to rise to 4.5% by the fourth quarter of 2018 and 4.8 by the end of 2019. Also, it is uncertain is how the changes in tax policy will affect home buying, especially at the luxury end. Under the new rules, only the interest on mortgage debt up to $750,000 is deductible which is down from the $1 million cap in current law.
For now, not all jumbo-mortgage lenders require large down payments. At some mortgage companies, qualified borrowers could put down as little as 5% on a jumbo mortgage up to $650,000. For loans up to $1 million, programs are available that allow 10% down. For jumbos topping $2 million, there’s a big jump where you need 30% down.
