Among borrowers using FHA loans, which come with low down payments, more than 26% tap relatives for financial help. That’s up from 22% in 2011.
Rising home prices are sending first-time buyers to their parents for help with mortgage down payments.
More than 26% of mortgage borrowers who used Federal Housing Administration-insured loans got assistance from a relative to make the down payment in the 12 months through September, up from about 22% in 2011, according to data released late last year as part of the agency’s annual report.
The FHA, an arm of the Department of Housing and Urban Development, insures lenders against losses on the sometimes riskier loans they make. Borrowers taking out FHA loans are predominantly buying homes for the first time and often have weaker credit profiles that make it more difficult for them to get a conventional loan. It makes sense these borrowers might need to ask for financial help, but the FHA is keeping an eye on whether the share doing so keeps rising.
While conventional mortgages can require buyers to put down as much as 20% of the purchase price upfront, FHA buyers can pay as little as 3.5%. Such loans make up about a 10th of all U.S. home-loan originations, a share that has declined in recent years.
Share of Federal Housing Administration insured borrowers receiving help with down payments.
Though the pace of home-price growth has slowed, prices are still consistently rising year over year, and higher mortgage rates are making buying more expensive. What’s more, many who missed the chance to purchase homes at modest prices are waiting for a pullback to jump in.
That has created a difficult situation for first-time buyers, many of whom are struggling to stockpile the cash for down payments. Factors including student debt and lackluster wage growth have made it difficult for many to keep up with rising home prices. The homeownership rate among those younger than 35 has fallen 8 percentage points since 2004 to 35% in 2017, according to Freddie Mac.
Is a National Housing Crisis Brewing?
Will the housing market survive the next economic slowdown?