WASHINGTON – May 8, 2019 – Freddie Mac’s May Insight examines the perceptions prospective homebuyers have around down payments, the funding sources they use, and how families and others assist them.
In addition to the common misbelief that lenders require a 20 percent downpayment on a mortgage, borrowers often mistakenly believe that a downpayment can only come from savings, says Sam Khater, Chief Economist at Freddie Mac.
While borrowers most often use savings for their downpayment, they also frequently use assistance from government or nonprofit organizations, gift money from friends and family, and seller contribution or proceeds from a previous home sale.
An analysis of the National Survey of Mortgage Originations (NSMO) found that 70 percent of homebuyers used savings, inheritance, other assets or retirement monies for a downpayment in 2016 – down from 79 percent in 2013. The analysis also shows that 31 percent of homebuyers used proceeds from the sale of another property over the four-year period, up eight percentage points from 23 percent, and homebuyers who used assistance or a loan from a nonprofit or government agency doubled from 5 to 10 percent.
Source: © 2019 Florida Realtors®