You’ve saved for years. Decades, even. And you’re about to blow it all at once because you need to buy a house.
The down payment is the least affordable thing in America, and it’s only getting worse. As part of her presidential campaign, Kamala Harris proposed a plan to provide up to $25,000 in down payment assistance for first-time homebuyers. The proposal, which also includes a focus on first-generation homeowners, is designed to help over 4 million first-time buyers within four years. Will it work?
The average lump sum payment made by Americans in 2023. Yes, down payments are even more expensive than taxes.
The struggle to afford a down payment has long been the biggest barrier to homeownership. Over the past few years, the average down payment has risen significantly, from less than $10,000 in 2014 to well over $25,000 today. Add that to decade-high interest rates and runaway housing prices in many parts of the nation, and we’ve got an affordability crisis.
Average size of down payments over the last 2 decades: Up and to the right.
Previous attempts to address down payment affordability, such as the American Dream Downpayment Initiative (ADDI) and the First-Time Homebuyer Tax Credit, have had mixed results. The ADDI, launched in 2003, provided up to $10,000 or 6% of the purchase price to first-time homebuyers but was eventually discontinued due to budget cuts. Similarly, the First-Time Homebuyer Tax Credit, introduced during the GFC, temporarily boosted home purchases but was phased out in 2010.
Harris’s proposal aims to lower the barrier to entry for many prospective homebuyers, particularly those who have been unable to save for a down payment due to high rental costs. The crucial difference from past plans is its focus on upfront cash assistance. The most expensive part of buying a home are closing costs: Mortgage down payment, agent commission fees, insurance, escrow services, and more. A tax credit or rebate doesn’t help get around these hurdles if there isn’t enough cash to close on your dream home to begin with.
Critics of the plan are saying that it doesn’t address the need for supply-side solutions, such as increasing the housing stock. They also point to the possible macroeconomic side effects, such as runaway home prices (as if this isn’t already a problem!) or increasing financial burden on taxpayers.
Are there other ways to get help with your down payment?
Here are a few existing nationwide programs that could help you with your down payment:
Additionally your state, county, and city may provide down payment assistance programs. In California, the CalHFA offers up to 3.5% of the purchase price as a deferred-payment junior loan, which doesn’t need to be repaid until the home is sold, refinanced, or the mortgage is paid off.
Beyond that, some employers offer down payment assistance as part of their benefits package, and non-profit organizations like NHF and NACA have additional programs.
Using Bramble could also help you put your cash to better use! Saving big on your closing costs could mean more cash available for your down payment - we get the average California home buyer $20,000 (over 2% of their purchase price) of their money spent on fees back. See how much you could save here.
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