Most home buyers put 6% to 7% of a home’s purchase price as a down payment. The story says many buyers think they need to come up with a 20% down payment – but the 20% figure comes from the standards used during The Great Depression.
When we bought our first home, we put down a 20+% down payment (the exact amount was larger as we were assuming the existing loans on the property and had to therefore pay for the current “equity”). 20% was a standard established due to the Great Depression of the 1930s. In recent decades, lenders started to cut the downpayment as low as zero percent (Hello 2008-2010 banking collapse?) Yet even in 2023, some lenders are back to 1-5% downpayments.
What size down payment you need to buy a home (cnbc.com)
At the time of our first home, prices had recently tripled or quadrupled in price (in fact, the highest year over year price increase in history to that time). However, I had worked part time since age 10 and saved nearly everything as I had to pay for my own college education. I worked while in college, and after graduating, was married and both of us were working. We put down 20+% to purchase our first home, and assumed existing first and second mortgages on the home, at a combined interest rate of about 11.5%. Yes, really. Our first home was a trash heap, owned by 8 out of state investors, and on the market for 8 months as no one wanted it. We put 3 years of sweat equity into it. This was not the “First home” that many first-time buyers are seeking today. Indeed, the yard was such a trash heap and overgrown, we could not even walk the side yards to get to the back yard when we bought it!
I have charts illustrating past home markets and more on my other blog. It was not a “walk in the park” at the time, as some believe.
