Home Buyers Attempt to Skirt High Borrowing Costs With Larger Down Payments

House prices are not the only thing reaching exorbitant levels. Homebuyers are also seeing their down payments go up.

The amount that a homebuyer puts upfront when purchasing a home set a record in 2024, with higher mortgage rates helping inspire many buyers to put more down to avoid borrowing costs. Down payments jumped by more than $2,000 in 2024 to hit a median of $29,900, according to a Realtor.com report, continuing the post-pandemic trend of rising home down payments.

“Today’s home sales are skewed toward higher-end homes, and this means larger down payments from more financially prepared, high-earning buyers as entry-level and lower-earning buyers sit out,” said Realtor.com Chief Economist Danielle Hale.

When broken down by quarters, the median down payment was even higher, with the second quarter having the highest median payment ever.

The amount that homebuyers put down to begin a home purchase has shot higher as more prices continue to grow.

The share of the initial payment increased as well, with the report showing that buyers put up 14.4% of the home’s purchase price last year, the most in more than a decade of data. Before the COVID-19 pandemic, the typical downpayment was a far lower portion of the home’s price.

Homebuyers are putting down a larger share of the home price when going into a purchase.

Down Payments Not Likely to Fall Until Mortgage Rates Do

With prices hitting record levels and mortgage interest rates remaining elevated, home buyers are looking to cut costs wherever possible.

Part of the rise in down payments is those with the funds to put more down upfront are doing so to avoid as much of the borrowing costs as possible.

It’s unlikely that down payments will drop much as long as borrowing costs remain near their recent highs, Hale said. The average 30-year, fixed-rate mortgage was 6.6% and has hovered near that level since early March, according to Freddie Mac.

“As mortgage rates ease, a more diverse set of buyers, in terms of budgets, will likely enter the market, and the incentive to minimize their home loan will soften,” Hale said. “However, if for-sale inventory fails to keep up with increased buyer demand, down payments could climb once again as the result of increased competition.”