House hunters said in a recent survey that rising down payment and closing costs are blocking their path to homeownership.
Twenty percent of those respondents have abandoned hope altogether, saying they will never be able to save enough.
When personal finance website Bankrate surveyed more than 2,700 Americans in January, a whopping 81% of the respondents described down payments and closing costs as “significant" obstacles to affording a home.
A down payment is cash a mortgage applicant pays a lender upfront to purchase a home. It can vary widely, ranging from 5% to 20% of the property’s total price. The median sales price for a pre-owned home was $402,000 in January, according to the National Association of Realtors, meaning someone looking to purchase a property around that cost would need to have between $20,100 and $80,400 available.
In 2024, the typical first-time homebuyer put 9% down on a purchase, while the average repeat buyer was shelling out 23%, according to NAR data. Those figures mark the highest down payment percentage for first-time buyers since 1997 and repeat purchasers since 2003, NAR said.
As home prices soar, drumming up that money has become a tall task for average Americans.
“When preparing to buy a home, saving for a down payment is arguably one of the most time-consuming aspects,” Elizabeth Renter, senior economist at personal finance website NerdWallet, said in a 2025 housing outlook. “Many people build a down payment fund over the course of several years.” Twenty percent of the respondents in the Bankrate survey said it will take them three to five years. Twelve percent said it could take them 10 or more.
From the Homes.com blog: How much is a down payment on a house?
As home prices climb, so do down payments and closing costs.
Closing costs vary widely by state and can range from 1% to 5% of the purchase price, according to Bankrate. "The national average closing costs for purchasing a single-family home come to $6,905, including transfer taxes, and $3,860 without, according to the most recent data from CoreLogic’s ClosingCorp (which covers the year 2021)."
The cost of a single-family pre-owned house climbed 3.9% in December compared to the same time a year earlier, according to the latest reading of the S&P CoreLogic Case-Shiller U.S. National Home Price Index. Wages, meanwhile, increased only 3.8% in that same time period, per U.S. Department of Labor calculations.
To be sure, affording a down payment and closing costs has been a longstanding financial struggle for Americans. Coming out of the pandemic, buyers also saw mortgage rates and prices skyrocket quickly. Homeowners who purchased their property in recent years generated their down payment by either setting aside funds specifically for a home, using a first-time homebuyer grant or getting financial help from family or friends, the Bankrate survey indicated.
The average American shopping for a home this year will likely need to use one of those same avenues. Housing economists mostly agree that home prices will continue to rise this year as long as demand outpaces supply. Wall Street onlookers also expect home loan rates to flirt with 7% in 2025.
“We cannot say with confidence that the housing affordability outlook will be rosier in the next 6 to 12 months, so patience may be called for many aspiring to homeownership,” Mark Hamrick, Bankrate senior economic analyst, said in a statement. “We might continue to face challenges like elevated mortgage rates and a lack of housing supply at the heart of affordability challenges.”