Down payment

Why is this important?

Lack of wealth for a down payment is a barrier to home ownership, especially for first-time homebuyers who do not have equity from the sale of a home and in housing markets with high and increasing rents [i]. Buyers who are unable to provide a substantial down payment can access various public lending programs, including Federal Housing Administration (FHA) mortgage loans, for lower down payment requirements. In exchange for a lower down payment, however, many of these loans require mortgage insurance premiums that increase the monthly mortgage cost [ii]. Lenders may also require a larger interest rate with a smaller down payment, increasing the overall expense to a homebuyer over the life of the loan. In a competitive housing market, buyers who are able to offer larger down payments often benefit.


[i] Gudell, Svenja. “Down Payment the Top Hurdle Holding Back Would-Be Home Buyers.”  Zillow.  12 April 2017.  Web.  5 September 2017. <>.

[ii] Lang, Bree J. and Ellen H. Hurst. “The Effects of Down Payment Assistance on Mortgage Choice.” The Journal of Real Estate Finance and Economics. 49.3 (2013).