The Dollars and Cents of Buying a Home
Most buyers – especially first-timers – rely on their agents for home financing advice.
Written by Manny Garcia on May 22, 2023
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 | n 24% n | n 28% n | n 31% n |
| Credit Union | n 14% n | n 12% n | n 16% n |
| Nonprofit | n 4% n | n 4% n | n 5% n |
| Government | n 13% n | n 15% n | n 16% n |
| Other | n 2% n | n 2% n | n 3% n |
| At least 1 | n 37% n | n 45% n | n 47% n |
| None | n 63% n | n 55% n | n 53% n |
Survey Methodology
nResearch 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.
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