Some Cities Require a Much Lower Down Payment on Homes

• Author: Bryan Miller
• Posted: 2024-09-29

Buying a home used to be a very easy process in America. A couple of generations ago, a person working a normal job in retail could go put a few hundred dollars down on a home, get a 30-year mortgage with very low interest rates, and lead an actual good life without a ton of debt. Then Wall Street was allowed to literally use people's mortgages as commodities, and the rest is history. Down payments shot up to around 20 and 30%, and they remain that high today in most locations in America. Of course, seeing as housing prices are nearly doubled now in 2022 compared to just 2020, that down payment of $50,000 you worked so hard to save would now literally only be half of what you need to put a down payment on a home. It really is insane just how much housing costs now. Though there are a few areas in America where you can put up a very low down payment and get a mortgage to move into a nice home.

There are some places in America that require a minimum of 30%. On a house that's over $300,000, you could be looking at putting down over 100k in order to just be able to get a mortgage for a home. That is an insane amount of money. The Villages, FL; Salisbury, MD; Sante Fe, NM; Santa Barbara, CA, and quite a few other places in America demand at least 30% before you can get approved. The reason these rates are so inflated is that many people are moving to these locations from homes they previously sold, which means they're buying in cash. You might think that cash buys are a boon for homeowners and thus they would require less, but it's more like they're being spoiled with these high offers and now the industry standard in these places has become 30%.

The average price for a home in suburbs and metro areas is $375,000. Of course, homes in rural areas aren't going for nearly that much, and so it really all boils down to what you can afford economically. Though even for wealthy people, many are opting out of these expensive cities due to the fact that home prices are just too high, and 30% of a fortune is still a small fortune. Many people can have a new home built for what they'd have to offer up as a down payment, and that's when you know the market's entirely out of whack.

The good news for people looking for low down payments is that there are also quite a few areas where just a little over 4% can get you into a house. Fayetteville, NC; Mobile, AL; Odessa, TX; Springfield, OH, and Topeka, KS, among some other places in America are very affordable to move to. Of course, a lot of these places aren't people's ideal locations. These aren't necessarily booming metro areas. Some of these are rural areas and smaller centers. While most are still technically the suburbs, to an extent, they're not actually cities. So they might not be appealing to some. Just know, however, that there are locations in America where down payments are actually affordable.
 

Don't Expect Much Parity Here

Unfortunately, you likely aren't going to find the 4% down payment rates catching fire across the market. The 30% rates spread via market parity because there's a lot more money to be made with this rate. It's what various mortgage companies start demanding when they see others doing it. This ends up pricing a lot of people out of the market. On the bright side, you can likely find quite a few places where you'd enjoy living, complete with low down payment rates, but you're going to have to look around. And you're likely going to have to look a little outside of cities. The fact is just that the housing market is volatile now, and the financial answer to handling this from corporations is to always charge people more while they can. Everything is a business, and businesses need to profit.

If you do need a home, you might want to act sooner rather than later. The forecast for the housing market is a bit grim in 2023, and America may be dealing with some serious issues. This means these corporations will make it harder for you to get a home, not easier, so be ready to act.