WASHINGTON — A new study evaluating the housing market found that wannabe D.C. buyers may need to invest significantly more than the traditionally recommended 20% down payment if they want to truly be able to afford their mortgage.
According to research done by real estate marketers at Zillow, households making the median income would need to put $188,087 down to afford a mortgage payment in D.C. That equates to a 33.1% down payment if you account for the typical D.C. home value being $568,862.
While the cash itself needed for D.C. homebuyers is higher than for the average American, the percentage of the down payment is actually slightly lower. A prospective buyer making the median income for the country needs to put down $127,743, or 35.4% of a house valued at $360,000, to comfortably afford the mortgage.
"Affording the mortgage" was calculated as a payment that is no more than 30% of the household's monthly income. Zillow research also found that if a household saves 10% of its income each month, with a 4% annual return, it would take D.C. buyers a little over 11 years to save enough for the needed down payment.
D.C. was far from an outlier in terms of whether a 20% down payment is enough. Only 10 of the 50 biggest U.S. markets would be able to comfortably afford mortgage payments with down payments of 20% or less. Pittsburgh was found to have the most affordable housing market.
"Down payments have always been important, but even more so today," said Skylar Olsen, chief economist at Zillow. "With so few available, buyers may have to wait even longer for the right home to hit the market, especially now that buyers can afford less. Mortgage rate movements during that time could make the difference between affording that home and not."
The numbers underscore why buying without assistance has become virtually unattainable for many Americans. More than 40% of 2023 buyers used a gift from family or friends toward their down payment, Zillow says. That's the highest rate since 2018.
"Saving enough is a tall task without outside help — a gift from family or perhaps a stock windfall," Olsen said. "Down payment assistance is another great resource that is too often overlooked."
According to Down Payment Resource, the average down payment assistance for qualified D.C. buyers is a little more than $20k.
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