The Typical Homebuyer’s Down Payment Is $56,000, Up 24% From a Year Ago

(NASDAQ: RDFN) — The median down payment for U.S. homebuyers was $55,640 in February, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s up 24.1% from $44,850 a year earlier—the largest annual increase in percentage terms since April 2022.

The typical homebuyer’s down payment last month was equal to 15% of the purchase price, up from 10% a year earlier.

This is based on a Redfin analysis of county records across 40 of the most populous U.S. metropolitan areas going back through 2011.

“Homebuyers are doing whatever they can to pull together a large down payment in order to lower their monthly payments moving forward,” said Rachel Riva, a Redfin real estate agent in Miami. “The smallest down payment I’ve seen recently is 25%. I had one client who put down 40%.”

Home prices rose 6.6% year over year in February, which is part of the reason down payments increased; a higher home price naturally leads to a higher down payment because the down payment is a percentage of the home price. But elevated housing costs (from both high prices and high mortgage rates) are also incentivizing buyers to take out larger down payments.

A bigger down payment means a smaller total loan amount, and a smaller loan amount means smaller monthly interest payments. For example, a buyer who purchases today’s median-priced U.S. home ($374,500) and puts 15% down would have a monthly payment of $2,836 at the current 6.79% mortgage rate. A buyer who puts 10% down on that same home with that same rate would have a monthly payment of $2,968. That’s $132 more per month, which adds up over the course of a mortgage. Mortgage rates are down from their October peak of roughly 8%, but are still more than double the all-time low hit during the pandemic.

Over 1 in 3 Home Purchases Are Made With Cash—a Near Record Share

Over one-third (34.5%) of U.S. home purchases in February were made with all cash, up from 33.4% a year earlier. That’s just shy of the 34.8% decade-high hit in November, and isn’t far below the record high of 38% hit in 2013.

Redfin defines an all-cash purchase as a home purchase with no mortgage loan information on the deed.

Some homebuyers are paying in cash for the same reason others are taking out large down payments: elevated mortgage interest rates. While a large down payment helps ease the sting of high rates by reducing monthly interest payments, an all-cash purchase removes the sting altogether because it means a buyer isn’t paying interest at all.