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  • The typical U.S. homebuyer made a $42,000 down payment in January, the lowest level in nearly two years, amid rising mortgage rates and low competition
  • The median down payment was equal to 10% of the purchase price, down from 14% a year earlier. 
  • Nearly one-third home purchases were paid for in cash, the highest share in nine years. 
  • The share of borrowers using FHA and VA loans to fund home purchases reached the highest level in over two years.

The typical U.S. homebuyer’s down payment fell 10% year over year in January to $42,375, its lowest level in nearly two years, amid dwindling competition and high mortgage rates. The median down payment was down 35% from the peak it reached in June, but still up more than 30% from pre-pandemic levels. 

January marks the third straight month in which down payments fell year over year.

The median down payment in January was equal to 10% of the purchase price, down from 13.6% a year earlier and the pandemic-era peak of 17.5% in May. The last time down-payment percentages were this low was early 2021, before the pandemic homebuying boom drove buyers to put more money down to make their offers more attractive. 

The data in this report is from a Redfin analysis of county records across 40 of the most populous U.S. metropolitan areas. January 2023 is the most recent month for which data is available. The down-payment data is limited to homebuyers who took out a mortgage.

Down payments are falling for several reasons:

  • The housing market is slow and there’s not much competition. Most offers for homes written by Redfin agents don’t face bidding wars. That’s a stark difference from the hyper-competitive housing market of 2021 and early 2022. Buyers no longer need to offer a big down payment to prove their financial stability and stand out from the crowd. Now that buyers often have the upper hand, they can offer an amount that works best for their individual circumstances. Diminished competition is also allowing more buyers to use FHA and VA loans, which typically allow for much smaller down payments. 
  • High housing costs and inflation. 6%-plus mortgage rates, still-high home prices and inflation are hitting homebuyers’ pocketbooks hard. Buyers don’t have as much money to allocate to a down payment because their monthly housing payments are higher than before; they may also be putting cash toward a mortgage-rate buydown instead of their down payment. Additionally, buyers may be inclined to hold onto as much cash as possible in these uncertain economic times.