Average Down Payments for U.S. Homes See First Annual Drop in Nearly Two Years

In a noteworthy turn, the typical down payment made by U.S. homebuyers has dipped for the first time in nearly two years, settling at an average of $62,468 a roughly 1% decline from the same time last year. That’s according to a fresh analysis of county records from 40 major metro areas conducted by Redfin.

Despite the slight dollar dip, down payments as a percentage of home prices held steady. Buyers are still putting down around 15% of a home’s value, a figure that has remained relatively consistent for the last four years, aside from a temporary drop into the 10% range in early 2023. Prior to the pandemic, 10% was closer to the norm.

Why Are Down Payments Shrinking?

It’s not that home prices are falling they’re actually up 1.4% compared to a year ago. But the growth has cooled. Last year at this time, prices were climbing about 4% annually. Slower home price increases mean slightly more breathing room for buyers.

But that’s not the whole story.

A big part of the decline is tied to who’s buying. Nearly one-third of home purchases are all-cash deals, meaning those buyers don’t make down payments at all. For those using a mortgage, many are opting for less expensive homes, driven by high mortgage rates and economic uncertainty. That shift brings the median down payment down in dollar terms, even as the percentage remains stable.

Mortgage rates hovering near 7% double the lows seen during the pandemic have made buyers extra cost-conscious. For many, that means choosing affordability over size or location.

“Starter Homes” and Smart Shopping Dominate

“The buyers I’m seeing right now are budget-conscious and extremely cautious,” said Fernanda Kriese, a Redfin Premier Agent in Las Vegas. “They’re not just looking for homes they’re hunting for good deals and getting serious about comparing mortgage options, fees, and down payment programs.”

This market is also attracting first-time buyers more than usual. Many are setting their sights on starter homes, aiming to minimize risk in case the economy worsens or job cuts spread.

Government-Backed Loans Gaining Ground

FHA and VA loans are making a comeback. About 15.3% of mortgage-backed home sales in April used FHA financing, up from 14.2% a year earlier. VA loans rose to 7.2% their highest level for April since 2020.

This shift reflects a more favorable environment for buyers with lower down payments or less conventional financing. In hot markets, those buyers can struggle to compete. But with bidding wars cooling off, sellers are more willing to accept these types of loans.

Conventional loans still rule the market, accounting for nearly 78% of mortgages in April.

Cash Buyers Still Holding Strong

Although cash purchases have dipped slightly from 31.6% to 30.7% they still represent nearly a third of all home sales. That’s significant, considering their peak near 35% in 2023 when mortgage rates spiked toward 8%.

Freddie Mac reports that 30-year fixed mortgage rates hovered at 6.84% in mid-June, slightly below the 6.95% seen a year earlier.

“Stable mortgage rates, better inventory, and slower home price gains are a winning combo for buyers,” said Sam Khater, Chief Economist at Freddie Mac. “It’s a good sign, especially during National Homeownership Month.”

Regional Highlights

• Highest Down Payment Percentages: San Francisco, Anaheim, and San Jose, where buyers typically put down 25%.
• Lowest Down Payment Percentages: Virginia Beach (1.8%), Detroit (5%), and Jacksonville (5.4%).
• Largest Down Payment Declines: Orlando, Jacksonville, and Tampa.
• Biggest Down Payment Increases: New York City, Baltimore, and Riverside.

All-Cash Purchase Leaders

• Most All-Cash Deals: Cleveland and West Palm Beach (about 50%), followed by Jacksonville and Miami (about 40%).
• Fewest All-Cash Deals: Oakland (18.2%), San Jose (18.3%), and Seattle (18.5%).

FHA and VA Loan Trends

• Most FHA Use: Riverside (26.7%), Las Vegas (26%), and Tampa (25.9%).
• Least FHA Use: San Francisco (0.6%), San Jose (1.6%), and Anaheim (4.8%).
• Most VA Use: Virginia Beach (41.7%), Jacksonville (18.3%), and Washington, D.C. (16.5%).
• Least VA Use: San Francisco, San Jose, and New York City (1% or less).