Summer pullback in mortgage rates helped pave way for lower down payments for many homebuyers

LOS ANGELES -- Homebuyers opted to make smaller down payments this summer as declining mortgage rates helped boost their purchasing power, though home shoppers’ upfront costs remain near their peak.

The average down payment on a U.S. home as a percentage of the purchase price was 14.5% in the June-September period, down from 14.7% a year earlier, according to data from Realtor.com.

The median down payment nationally was $30,319, just 0.4% below what it was in the third quarter last year.

Both trends also eased from the all-time highs set in the April-June quarter. In that period, the average down payment as a share of the purchase price climbed nationally to 14.9%, while the median down payment rose to $32,659.

Years of rising home prices and mortgage rates have made homeownership less affordable for many Americans. Larger down payments reduce the amount that homebuyers have to finance, which lowers the monthly mortgage payment.

But saving up enough to buy a home can be particularly challenging for first-time homebuyers who don’t have any home equity to put toward their down payment. It’s one reason they accounted for just 26% of all homes sold last month, according to the National Association of Realtors.

That matched the all-time low from August. First-time homebuyers have accounted for 40% of sales historically.

Down payment dollar amounts fell in 21 states in the third quarter, according to Realtor.com. The biggest decline was in Florida, where the median down payment fell 24% from a year earlier to $27,000. Texas was second, down 23.2% to $14,400, followed by Wyoming, down 22.3% to $25,200.

Among the states where down payments increased in the third quarter were Rhode Island, up 33.3% to $60,400; Delaware, up 32.8% to $53,600; and, Wisconsin, up 25.2% to $35,500.

It’s too early to tell whether down payments will generally ease from here. The average rate on a 30-year mortgage fell in late September to 6.08% — its lowest level in two years — it's climbed in recent weeks to its highest level in nearly three months. At the same time, home prices have kept rising, albeit at a slower rate.

Economists predict mortgage rates will remain choppy this year, but generally forecast them to ease in 2025. That should help expand how much home shoppers can afford, giving them more flexibility on the size of their down payment, but also could lead to higher home prices if more buyers enter the market.