Households in the Philly area would need six-figure down payments to comfortably afford a typical home
To comfortably afford mortgage payments, buyers in the Philly region would need smaller down payments than if they were buying in other big metros. But the ideal down payment is out of reach for most.
In a sign of just how expensive home ownership has become, a household in the Philadelphia region that makes the typical income would need a down payment of more than $100,000 to be able to afford the typical home, according to a Zillow report.
Zillow’s analysis found that for a median-income household in the Philadelphia metropolitan area to comfortably afford monthly mortgage payments on a median-priced home, it would need to put down $103,471. That’s almost 29% of the $362,204 cost. It’s less than the down payment of about $127,800 — or roughly 35% — needed across the 50 biggest U.S. metro markets, but it’s unrealistic for most Philadelphia-area buyers.
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Putting more money down can lower the cost of monthly mortgage payments. But down payments and other up-front costs can be major hurdles to buying a home, especially for first-time buyers who don’t have cash on hand from selling a prior home.
Traditionally, home buyers have been told to aim for at least a 20% down payment to avoid having to pay for private mortgage insurance, which protects the lender if the borrower doesn’t repay the mortgage.
But in a time of soaring home prices, when the typical U.S. home is worth about twice what it was in 2019, according to Zillow, 20% down is an impossible amount for most home buyers. So many households make smaller down payments to get into a home.
A 2023 report by the National Association of Realtors found that the typical down payment for first-time home buyers was 8%. For repeat buyers, the typical down payment was 19%.
Some buyers who don’t have a lot of money to put down are stretching their monthly budgets as both prices and elevated mortgage interest rates help push up monthly payments. Or buyers are purchasing less-than-ideal properties to make home ownership work. Others are priced out of the market.
Zillow’s analysis considered monthly home payments affordable if they were no more than 30% of a household’s monthly income. Zillow used its home value data to estimate mortgage payments that include principal and interest and estimated costs for property taxes and insurance.
Even if households can make down payments of around 20%, monthly payments can still be unaffordable depending on location, including the Philadelphia region. Putting down 20% or less for a typical home results in mortgage payments that are affordable for median-income households in just 10 out of the 50 biggest metropolitan markets, according to Zillow.
In the Philadelphia metro, saving enough for a 29% down payment on a median home would take at least nine years for households making the median income, according to Zillow. That’s if the household is able to save 10% of its income every month with 4% annual returns.
The Pittsburgh area is the most affordable large metro out of the 50 analyzed. A median-income household there could theoretically afford monthly payments on a median-priced home costing $217,285 without putting any money down.
The San Jose, Calif., metro area is on the other end of the affordability spectrum. A median-income household there would need to put down a whopping 81% to comfortably afford monthly payments on a median-priced home, which costs more than $1.6 million. That’s a down payment of $1.3 million.