Down Payment Increases Potentially Causing More Debt

• Author: Jacob Greene
• Posted: 2024-03-06

Most adults who are in the market for their own home have heard time and again that it's important for them to come up with a down payment for the house. This way, the mortgage company is far more likely to lend the money to the borrower. Not only that, but a solid down payment will also ensure that the mortgage rates are better, giving you lower interest rates and a much more comfortable repayment structure. Though over the past couple of years, down payments rates have risen dramatically. To be clear, the industry standard down payment is still 20% of the total home cost, but 20% of $450,000 is a whole lot more money than 20% of $200,000. With home prices having risen well over 100% over the past few years, even people making good money have effectively been priced out of the market. According to articles from Yahoo! Money, Bloomberg, CNN and other sources, the typical down payment for a home in America has more than doubled since 2019. People needing to come up with $80,000 instead of $40,000 is a burden most cannot bear.

As a result, it's no longer just the poorest Americans being priced out of housing. In fact, the poorest Americans aren't really feeling the effects to that extent, as most are eligible for Section 8 and other HUD programs to assist them anyway. It's really the middle class that has been hit the biggest by these increases in pricing. This is a staggering number, but it's widely available on a range of different sites and sources: The American middle class is 61% smaller than it was in 2019. What this means is that tens of millions of Americans who were leading comfortable middle class lives have now been plunged into poverty. This is entirely unsustainable.

Americans don't have to imagine this on some hypothetical thought experiment level; they're living this as their daily reality. Only a few short years ago, the average American could afford to scrimp and save and to put a down payment on a home to get a sweetheart mortgage. Now, however, in the blink of an eye, that same American cannot even come close to affording that down payment. Is there anything being done to correct this issue?

Unfortunately, the government isn't doing much to help drop the prices in the housing market. Whether this is collusion with huge corporations or just a topic they'd rather not address, no one knows for sure. All anyone does know is that huge corporations are buying up every little bit of property they can in America, and they're controlling the rates for homes. The higher a home's price tag is, the more people have to come up with for a down payment. What's really exacerbating this issue is that mortgage lenders are refusing to offer home loans to people unless they can come up with this money. Some lenders in America are even demanding 30%, and few if any are willing to settle for 10%. This leaves Americans really struggling to make those down payments.

It's Hard, But Saving is a Must

It really seems like an impossible hill to climb for so many Americans. Fewer people are moving out of their parents' houses today than in the past hundred years. You can find millions of homes with three generations of family living within the walls. Once you compound the higher down payments with student debt and other expenses, you see that this is a massive problem.

The other expenses make it exponentially harder to save. Sure, you'd love to put a few hundred back every month to start saving up for your own home, but then you get to the grocery store and it's double the cost of two years ago; or you go to the fuel pump and spend over $100 every week to travel to work. These added expenses are crippling Americans, and there is no relief on the horizon. Even the much lauded "Inflation Reduction Act" signed by President Biden two months ago doesn't even attempt to address any of these issues until 2024. In plain English, Americans are on their own during this crisis.

Though if you're looking to put a down payment on a home, it's important that you figure out ways to save. You don't want to take out a cash loan and take on even more debt just to get a house. You'll find yourself underwater in a hurry.