Affording Down Payments Not Easy for Dallas-Fort Worth First-Time Buyers

The numbers don’t favor first-time homebuyers in Dallas/Fort Worth when it comes down to a 20 percent down payment.

A new Zillow analysis shows that first-time buyers today need a year longer to save for a down payment than they did five years ago.

In Dallas-Fort Worth, let’s use this math:

• A typical starter home — the median home in the bottom third of home prices — is valued at $206,828.
• It would take an average renter household saving 10 percent of its income 7.4 years to save for the downpayment on that starter home. In 7.4 years, you could forget what you’re saving for.
• With a 20 percent down payment and a 3 percent mortgage rate, the monthly mortgage payment would be $1,136. With a 10 percent down payment, it would be $1,401 — still only 20.6 percent of the typical renter income.

For contrast — and a stark contrast at that — consider the plight in the San Francisco market. To rustle up a 20 percent down payment, the average renter household saving 10 percent of its income would need 17 years and five months to save for the downpayment on a starter home valued at $846,415.

Having lived in the San Francisco area 20 years ago, I wondered how the average person was able to afford a home in the Bay Area. One word: Equity.

“Without the equity from a previous home sale, first-time homebuyers face more challenges in coming up with a down payment,” Zillow economic data analyst Nicole Bachaud says in the study. “In a housing market where prices are rising at record rates, especially when compared to renter incomes, the ever-increasing sum of a 20 percent down payment can feel out of reach.”

The good news: 64 percent of first-time buyers can put down less than 20 percent. Renters can save up a 10 percent down payment on a typical starter home after three years and three months, according to the Zillow study. Putting down 5 percent would take 19 months.

“That lower upfront payment comes with higher monthly payments, but the opportunity to build equity can outweigh those extra costs for many,” Bachaud says.