These days, a six-figure down payment may be needed to buy a home

These days, a six-figure down payment may be needed to buy a home


Home prices recently hit a record high while mortgage rates stubbornly remain just below or just above 7%. That places a huge burden on people who want to buy a home.

Researchers at real estate marketplace Zillow recently crunched some numbers that dramatically reveal just how big a burden it is. To be able to afford the monthly payment on the median-priced home costing $360,000, a middle-class household would have to come up with a six-figure down payment – $127,750.

While the typical down payment has traditionally been 20% of the purchase price, Zillow’s calculation suggests the buyer’s down payment would have to be 35.4% of the purchase price to keep the monthly payment affordable.

Looking back to 2019, when mortgage rates were hovering just above 4% and the typical home was worth about 50% less than it is now, that home would have been affordable with no money down.

By making a $127,750 down payment, a household making the median income could buy a home valued at about $360,000 and keep the monthly mortgage payments at no more than 30% of that household’s monthly income.

More important than ever

“Down payments have always been important, but even more so today,” said Skylar Olsen, chief economist at Zillow. “With so few [homes] available, buyers may have to wait even longer for the right home to hit the market, especially now that buyers can afford less.”

Olsen notes that movements in mortgage rates can make a difference but having a large down payment is also important in keeping the monthly payment affordable.

“Saving enough is a tall task without outside help — a gift from family or perhaps a stock windfall,” Olsen said. “To make the finances work, some folks are making a big move across the country, co-buying or buying a home with an extra room to rent out. Down payment assistance is another great resource that is too often overlooked.”

Needless to say, saving up $127,750 is no easy task. According to Zillow’s calculations, it would take a household making the median income about 12 years, assuming its members save 10% of their income each month with a 4% annual return. 


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