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Zillow Research

The Dollars and Cents of Buying a Home

Most buyers – especially first-timers – rely on their agents for home financing advice.

Buying a home can be a daunting task for many people. Learning the ins and outs of financing is an important first step. About half of buyers (55%) say they got help for education about the home financing process from a real estate agent – a higher percentage than from a financial institution (32%), website (30%), or a friend, relative, neighbor or colleague (29%). First-time buyers are slightly more likely to report getting such help from an agent: 58% reported doing so versus 53% for repeat buyers.

All Successful Buyers First-Time Buyers Repeat Buyers
Real estate agent, realtor or broker 55% 58% 53%
Financial institution (e.g. Bank, credit union) 32% 33% 32%
Website or search engine (e.g. Google, Bankrate, Nerdwallet, etc) 30% 38% 25%
Friend, relative, neighbor or colleague 29% 39% 23%

 

Prospective buyers most likely to rank understanding mortgage costs among their top challenges

About half (56%) of prospective buyers said that understanding all of the costs associated with a mortgage and home payment was among the top 3 most difficult parts of financing a home purchase. Understanding how much they can afford followed (45%) then researching mortgages and rates (41%).

Prospective buyers were least likely to rank understanding their credit report and credit score (25%) among their top 3 difficulties.

Share of prospective buyers that said each was among their top 3 most difficult home financing activities
Understanding all of the costs associated with a mortgage and home payment 56%
Understanding how much I can afford 45%
Researching mortgages and rates 41%
Improving my credit score 37%
Pre-approval process 35%
Locating necessary documents 32%
Finding a mortgage lender 29%
Understanding my credit report and credit score 25%

 

Saving up a down payment stresses about a quarter of buyers

About one in four (28%) buyers said saving up enough for a down payment was very or extremely stressful. This stress was more common for buyers of color (34%) and first-time buyers (41%). 

All Successful Buyers First-Time Buyers Buyers of Color
28% 41% 34%

 

Most buyers make at least one sacrifice to save up their down payment

Most buyers (71%) reported at least one sacrifice to save up enough to finance a down payment. The most common sacrifice was reducing spending on entertainment (43%), followed by postponing or canceling vacation plans (38%). Buyers of color (78%) and first-time buyers (84%) were more likely to report at least one sacrifice to save up their down payment.

  All Successful Buyers Non-White Successful Buyers White Successful Buyers
Reduced spending on entertainment (e.g. dining out, concerts, movies, etc.) 43% 43% 44%
Postponed or canceled vacation plans 38% 47% 34%
Worked more hours or got a second job 31% 31% 31%
Canceled subscriptions (e.g. streaming, cable, internet, phone) 23% 29% 21%
Lived in a smaller home than desired 16% 13% 18%
Skipped meals 12% 15% 10%
Lived outside my preferred neighborhood or location 12% 11% 12%
Postponed or canceled health services 9% 10% 9%
I made another kind of sacrifice 4% 3% 5%
Any sacrifice 71% 78% 67%
None of the above 29% 22% 33%

 

  All Successful Buyers First-Time Buyers Repeat Buyers
Reduced spending on entertainment (e.g. dining out, concerts, movies, etc.) 43% 61% 32%
Postponed or canceled vacation plans 38% 48% 32%
Worked more hours or got a second job 31% 44% 23%
Canceled subscriptions (e.g. streaming, cable, internet, phone) 23% 32% 17%
Lived in a smaller home than desired 16% 18% 15%
Skipped meals 12% 15% 9%
Lived outside my preferred neighborhood or location 12% 17% 8%
Postponed or canceled health services 9% 12% 7%
I made another kind of sacrifice 4% 6% 3%
Any sacrifice 71% 84% 62%
None of the above 29% 16% 38%

 

Most buyers report paying some kind of mortgage insurance

73% of buyers report paying mortgage insurance, while 27% of buyers report paying no mortgage insurance. Among those that reported paying some kind of mortgage insurance, 63% report paying it monthly and 37% report paying it on a yearly basis.

 

All Successful Buyers Non-White Buyers White Buyers First- Time Buyers Repeat Buyers
Private Mortgage Insurance (PMI) 39% 47% 34% 37% 40%
Mortgage Insurance Premium (MIP) 35% 35% 35% 49% 25%
Another kind of mortgage insurance 8% 12% 6% 6% 9%
Any mortgage insurance 73% 83% 68% 86% 65%
None 27% 17% 32% 14% 35%

Earnest money tends to increase with home price

Most buyers report some amount of earnest money to be the winning offer on a home: 79% reported including some in their final offer. Buyers that manage to buy without any earnest money are more likely to buy a lower cost home – potentially a sign of a less competitive market. Buyers who bought a home for less than $200,000, for example, were more likely to report offering no earnest money (17%) than those who bought a home for at least $400,000 (9%)

Earnest Money in Dollars All Successful Buyers Bought home for less than $200k Bought home for $200-$300k Bought home for at least $400k
$1 – $3,999 21% 17% 19% 9%
$4,000 – $7,999 16% 32% 23% 8%
$8,000 – $11,999 14% 11% 19% 17%
$12,000 – $15,999 10% 12% 14% 16%
$16,000 or more 18% 11% 8% 13%
$0 15% 14% 11% 30%
I do not know 5% 3% 6% 7%

About a third of buyers report getting some form of down payment assistance

Down payment assistance – basically grants or “free money” towards a down payment – can help buyers make ends meet when buying a home. About one in three (37%) buyers report getting some kind of grant towards their down payment – most commonly from a bank (24%) or credit union (14%). Grants from government institutions (13%) can also help buyers finance their down payments. 

For first-time buyers, almost half (45%) report getting some kind of down payment assistance. And buyers of color are also more likely to benefit from these grants (47% report getting one). 

All Successful Buyers First-Time Buyers Buyers of Color
Bank

24%

28%

31%

Credit Union

14%

12%

16%

Nonprofit

4%

4%

5%

Government

13%

15%

16%

Other

2%

2%

3%

At least 1

37%

45%

47%

None

63%

55%

53%

Survey Methodology


Research Approach

In order to gain a comprehensive understanding of U.S. successful and prospective buyers, Zillow Group Population Science conducted a nationally representative survey of 665 successful and 1908 prospective buyers. The study was fielded in December 2022.

For the purpose of this study, “successful buyers” refers to household decision makers 18 years of age or older who moved to a new primary residence that they purchased in the past two years. “Prospective buyers” refers to household decision makers 18 years of age or older who intend to buy a home in the next year.

Sampling & Weighting

Results from this survey are nationally representative of buyers. To achieve representativeness, ZG Population Science used a two-prong approach. First, the initial recruitment to the sample was balanced to all buyers from the U.S. Census Bureau, 2021 American Community Survey (ACS) on the basis of age, relationship status, income, ethnicity/race, education, region and sex. Additional targeted subgroups were sampled based on all key household demographic characteristics. Second, statistical raking was used to create calibration weights to ensure that the distribution of survey respondents matched the U.S. population with respect to a number of key demographic characteristics obtained from analyses of the 2021 Current Population Survey Annual Social and Economic Supplement (CPS ASEC). 

Quality Control

To reduce response bias, survey respondents did not know that Zillow Group was conducting the survey. Several additional quality control measures were also taken to ensure data accuracy: 

  • We identified and terminated any professional respondents, robots or those taking the survey on multiple devices. 
  • Completion times were recorded to ensure that surveys submitted by the fastest respondents, who may have rushed through the survey, did not provide poor quality data. If necessary, these respondents were removed from the sample. 
  • In-survey quality control checks identified illogical or unrealistic responses. 

 

The Dollars and Cents of Buying a Home