According to the National Association of Realtors (NAR), more than one-in-five potential home buyer is opting out of exploring the option of buying a home. At least not without doing the proper research. Simply because they believe the down payment will be prohibitively expensive. The NAR’s 2017 Aspiring Home Buyers Profile report indicates more than one-third (39 percent) of non-owners said they believe they need more than 20 percent of the total purchase price of their home in order to buy. One-quarter believes they need to put down between 15 and 20 percent, and one-fifth believes they need between 10 and 14 percent.

In 2016, the average down payment was 11 percent, and it is frequently far lower for first-time homebuyers who qualify for special mortgage programs. Ninety-nine percent of buyers under the age of 35 actually put down less than five percent on their mortgages most of the time last year. Thanks in large part to “three-percent-down” programs backed by Fannie Mae and Freddie Mac. These young buyers, who are usually first-time buyers, also often qualify for the Federal Housing Administration (FHA)’s 3.5-percent-down program. Buyers who are not making their first purchase also may qualify for Department of Veteran’s Affairs (VA) loans and U.S. Department of Agriculture (USDA) loans, both of which offer eligible buyers low- and even no-down-payment options.

Aspiring buyers also said they probably would not be able to purchase a home because their credit scores were too low. It is true buyers need more solid credit than they might have in the early- and mid-2000s, but Jonathan Smoke,’s chief economist, noted borrowers with scores as low as 630 were getting approved for loans in 2016. Smoke summed up the situation this way: “For the Millennial dreaming of buying a home this year, you need a FICO score of at least 639 and enough money that you could put down, at most 5 percent. If you live in a typical American town, what you need could be as little as $3,500.”

Another issue for first-time buyers in particular, most of whom tend to be “Millennials” between the ages of 18 and 34, is likely their ideas about what type of home they want are very different than a traditional first-time buyer. There is plenty of evidence indicating Millennials are eventually going to move in large numbers to the suburbs and forgo their urban living preferences in order to raise families. They place a great deal of value on putting “personality” in to their homes and may not be willing to purchase a “starter home” if they believe they will be able to purchase something closer to their goals in a few years. Also, they value technology and amenities that do not come cheap. Although the energy efficiency this generation values can make homeownership less expensive over time. Home Depot chief marketing officer Kevin Hofmann noted they also want more options in their homes. “Five styles of granite use to be sufficient, but the company may now have to offer 30 types,” he explained. With these types of requirements for choices in a new home, first-time buyers simply may have to save longer, even with lower down payments, than they would if they were buying Smoke’s “typical” starter home with $3,500 down.

About the Author

Carole VanSickle Ellis serves as vice president of research and analysis at the Self-Directed Investor Society, helping investors “declare independence from Wall Street.” Contact her at or visit


  • Carole VanSickle Ellis

    Carole VanSickle Ellis serves as the news editor and COO of Self-Directed Investor (SDI) Society, a membership organization dedicated to the needs of self-directed investors interested in alternative investment vehicles, including real estate. Learn more at or reach Carole directly by emailing

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