Beg, Borrow or Save: Coming Up With a Down Payment

In this article:

How much you’re required to put down on a house is determined by the type of loan you get, but it generally ranges from 3% to 20% of the purchase price of the home. Beyond lender requirements, it can be financially beneficial to increase your down payment to reduce the amount of your monthly mortgage payment. Offers with larger down payments can be more appealing to home sellers who are looking for buyers with a low risk of financing issues that could delay the sale – or worse, have it fall through.

What is a down payment on a house?

The down payment on a house is a portion of the cost of a home that’s paid in cash. The balance of the purchase price is usually paid by a loan you secure from a lender and pay back in a monthly mortgage payment. Down payments are expressed as a percentage of the total purchase price and the percentage you’re required to pay is dictated by the terms of your loan. Note that not all home buyers with financing are required to produce a down payment.

How much to put down on a house?

The ideal down payment amount is 20% of the purchase price of the home. Paying 20% up front reduces your monthly mortgage payments, can eliminate costly private mortgage insurance (PMI), can reduce interest rates and improves the competitive nature of your offer.

When trying to decide how much you should put down on a home, play around with a mortgage calculator to determine an amount that works best for your finances. As you explore, remember that in addition to your down payment, you’ll have some other up-front costs you’ll need to pay at closing, collectively called your escrow funds. It can include your closing costs, prorated taxes, title fees and more.

20% down reduces mortgage payment

The more money you pay upfront, the less you have to borrow from the lender, and the lower your monthly payment will be.

Example: Let’s say you buy a $300,000 home at a fixed rate of 4.25%.

  • With a 20% down payment ($60,000), you’d borrow $240,000, and your monthly payment would be $1,548.
  • With a 5% down payment ($15,000), you’d borrow $285,000, and your monthly payment would be $1,950.

20% down eliminates private mortgage insurance (PMI)

When you put 20% down, that means you own 20% of your home. This allows you to avoid paying PMI, which is a monthly charge that’s rolled into your mortgage payment to protect the lender from what they see as a riskier loan.

Example: If you buy the same $300,000 home noted above, with 5% down, your PMI payments each month would be $181 until you own 20% of the home and refinance into a loan without PMI.

mortgage payment breakdown based on down payment of 5% or 20%

Example of the benefits of putting 20% down on a $300,000 home purchase with a 4.25% interest rate on a 30-year fixed mortgage.

20% down improves mortgage rates

Buyers purchasing with a 20% down payment can often get better interest rates. A higher down payment is considered a sign that you’re financially stable, and thus a less risky borrower in the eyes of your lender. Overall, your risk is determined by three key factors: your debt-to-income ratio, your credit score and your loan-to-value ratio. The more money you put down as part of your down payment, the stronger your loan-to-value ratio.

For example, if you borrow $240,000 on a home that’s worth $300,000, like our example above, you have a loan-to-value (LTV) ratio of 80%, or $240,000 divided by $300,000. The lower the percentage, the better.

20% down makes your offer more appealing to the seller

In a competitive market, a larger down payment can make your offer more appealing to a seller, as they feel confident that you won’t have financing issues at closing that could cause the sale to fail.

What is the average down payment on a house?

The typical down payment on a mortgaged home in 2019 was 10-19% of the purchase price of the home. While 20% is the traditional down payment amount, 56% of buyers put down less than 20%, according to the Zillow Group Consumer Housing Trends Report 2019.

Here’s a breakdown of down payment percentages from buyers who purchased homes with a mortgage in 2019:

  • 20% of buyers have a down payment of more than 20%
  • 19% of buyers have a down payment of 20%
  • 21% of buyers have a down payment of 10-19%
  • 9% of buyers have a down payment of 6-9%
  • 17% of buyers have a down payment of 3-5%
  • 10% of buyers have a down payment of less than 3%
  • 5% of buyers don’t remember the size of their down payment

Younger buyers are more likely to purchase a home with less than 20% down. Sixty-two percent of Gen Z and Millennial buyers make a down payment of less than 20%. And 60% of Gen Xers do the same. Far fewer Boomers and Silent Generation buyers put down less than 20% down, just 42%.

What is the minimum down payment for a house?

The minimum down payment for a house depends on the loan you’re using to finance the purchase. Some people may be able to qualify for loans with 0% down, but loans with 3% down or 3.5% down are common. Lower down payment loans, including the 3.5% FHA loan, are designed to make homeownership more attainable for first-time buyers.

Keep in mind that even if you finance with a loan that allows a lower down payment, you’ll usually still have to pay closing costs out of pocket. There are a few 0% down loan types that will roll all costs into the mortgage, but they can be hard to come by.

  • Conventional loan minimum down payment: 3%
  • FHA loan minimum down payment: 3.5%
  • VA loan minimum down payment: 0%
  • USDA loan minimum down payment: 0%

What are the zero-down payment mortgage options?

For most zero-down payment home loans, there are certain criteria buyers have to meet, and many people don’t qualify. Certain groups like health care workers, educators, protectors, veterans and households with disabled members can qualify for specific programs. Requirements vary, but many of these programs are available to first-time buyers or those who haven’t owned a home for at least the past three years. The home they’re buying usually has to be their primary residence, too.

Down payment assistance program: These programs allow buyers to take out a second mortgage to cover the cost of their down payment, sometimes with benefits such as zero percent interest and deferred payments. These programs are usually run by government agencies or nonprofits.

Below-market first mortgages: Also known as first-time home buyer programs, these are below-market interest rates with reduced closing costs or fees. They’re typically funded by state housing finance agencies as a way to help lower up-front and ongoing costs for first-time buyers.

Tax credit or mortgage credit certificate (MCC): The MCC is a tax credit that allows first-time home buyers to offset a portion of their mortgage interest, up to $2,000 per year, which also helps buyers qualify for a loan because it counts toward monthly income.

For more information about down payment options, read about the benefits and find resources in the Mortgage Learning Center.

If you’re concerned about applying too much of your savings on a down payment and not having enough cash for costly home repairs, consider buying a Zillow-owned home. Our properties are evaluated, repaired and brought to market as move-in ready homes.

How to save for a down payment on a house

Saving enough for a down payment can be one of the biggest hurdles to homeownership. According to the Zillow Group Report, 22% of buyers said saving for a down payment is difficult or very difficult. And, it can take a long time. Buying a roughly $220,000 home and saving about 10% of the median annual income, buyers today need more than 7 years to save a 20% down payment.

Most buyers save the traditional way, tucking away a little money from each paycheck, and 55% of buyers say they made some kind of financial sacrifice to buy their home.

how the average home buyer sources their down payment

Saving strategies

Minimize your life: Take a look at your spending and belongings with a critical eye. Do you have unused belongings you could sell? Perhaps empty out that storage unit to avoid the monthly charge?

Spend less: Cutting back on indulgences like dining out, cable TV or coffee shop drinks. Twenty-five percent of buyers say they reduced their spending on entertainment to afford their home purchase, and 16% report postponing or canceling vacation plans.

Earn more: Eighteen percent of buyers picked up additional work to buy their home, whether that is starting a side hustle, taking on extra shifts at work or reducing time off.

Ask for help: Buyers also ask friends and family for assistance, even using birthday cash or wedding money as part of their down payment. Thirty-four percent of buyers with a mortgage report using a gift or a loan from friends and/or family for their down payment, accounting for 15% of the average mortgage buyer’s down payment.

First-time home buyer down payments

According to the Zillow Group Report, almost half of all home buyers (45%) are first-time buyers. While most repeat buyers can apply the equity from the home they’re selling to their new home, it’s more challenging for first-time home buyers to get the money they need to secure a down payment.

This may be why using gifts or loans from friends and/or family is more common among first-time mortgage buyers at (43% report using it for at least a portion of their down payment).

Down payment gift rules

If you’re planning on using gifted money as part or all of your down payment, it’s important to realize that there are restrictions and documentation requirements.

First, your lender will need to know the source of your down payment money. Expect your lender to evaluate your past 3+ months of banking activity. Keep a paper trail of any large transfers so you can accurately account for any deposits that occur during this time period.

Your lender will also want to confirm that the money you’ve been gifted is in fact a gift, and isn’t a loan from a friend or family member that’s expected to be paid back. Additional loans affect your debt-to-income ratio and potentially make you a riskier borrower. Here are the things your lender will look for:

Relationship of gifter: Generally, gift money needs to come from a family member, spouse or partner.

Down payment gift letter: Lenders will often require that the donor write a letter that clarifies your relationship, documents the amount of the gift and the source of the gift, confirms contact information, and documents the address of the property. It also should document that the gift is a gift, and not actually a loan.

Gift money loan requirements: Not all loan types will allow you to make a down payment with 100% gift funds, especially if the home will not be a primary residence. Check with your lender to confirm the minimum borrower contribution from your personal funds for the home you plan to buy.

Source: zillow.com

How to Actually Afford to Buy a Home in America

Home buying hurdles exist — but research, creativity and flexibility will help you clear them.

Home buyers today face tough challenges — housing prices have soared, a dollar doesn’t go as far as it once did and rent is more expensive than the past.

How are people today making such a large purchase despite these hurdles? With more flexibility and a bit of financing creativity, today’s buyers are finding ways to achieve homeownership.

Know your options (and credit score)

The first step to knowing if you can afford a home is figuring out what financing options are available to you, including what mortgages you’re eligible for and how much you need (and can afford) to put down upfront.

Learning the minimum FICO score required by lenders and understanding your own credit score are important starting points.

Many home shoppers aren’t sure how much they have to put down on a home, what the lender-required minimum down payment will be (it’s not always 20%), or what programs are available to help with down payments, like FHA loans.

Before buyers even start thinking about saving for a home, they should know what their financial resources are and if they’re eligible to buy.

Make enough money to save

With fewer resources to pull from than their older, wealthier counterparts, renters wanting to buy face tough financial headwinds.

According to the Zillow Group Consumer Housing Trends Report 2019, renter households typically earn a median income of $37,500 annually, which is nearly $40,000 less than the median household income netted by households who recently bought a home (of whom the median household income is $75,000 annually).

While there are ways to enter into homeownership without making $75,000 in household income, it’s hard to afford to buy if you make significantly less. “If you’re making $37,500 per year, it’s probably not feasible for you to buy in almost any market,” says Zillow Chief Economist Dr. Svenja Gudell.

While households purchasing homes are more likely to have two incomes than renter households (and thus a higher median household income combined), even two-income households struggle to afford to buy in competitive markets.

Save enough cash (but not as much as you think)

One of the most daunting parts of home buying? The down payment. In fact, two-thirds of renters cite saving for a down payment as the biggest hurdle to buying a home, according to the Zillow Housing Aspirations Report.

For people buying the national median home valued at $229,000, with the traditional 20% down payment, that’s $45,800 upfront — just to move in.

“The down payment remains a hurdle for a lot of people,” says Gudell. “But they should know they don’t have to put 20% down.”

Although putting down less than 20% means additional considerations, such as the cost for private mortgage insurance (PMI), some find it worth the hassle. In fact, according to the Zillow Group Consumer Housing Trends Report 2019, only one-fifth of recent buyers (20%) put 20% down, and just over half of buyers (56%) put less than the traditional 20% down.

Buyers are also getting creative about piecing together a down payment from multiple sources. According to the report findings, 34% of buyers who get a mortgage also get help in the form of gifts or loans from friends and family to come up with a down payment. 

Know your deal breakers, but be flexible

To get into a home — even if it’s not the home of their dreams — some of today’s buyers are considering homes and locations outside of their initial wish list and getting increasingly flexible when it comes to neighborhood, house condition and even home type.

“I do think people get discouraged when they look in their target neighborhood and they see homes around $170,000 when they’re looking for a $110,000 home,” Gudell says.

Affordably priced homes do, in fact, exist. But in popular areas, where people most often want to live, it’s going to be harder to find that cheaper home, Gudell says.

“If you’re willing to take a longer commute and make a couple trade-offs, you might be able to find a home that is farther out that might be cheaper,” Gudell explains. “You have to leave the paved path before you can find cheaper choices.”

Related:

Source: zillow.com

28 Stats That Sum Up the American Housing Market

See the numbers behind how Americans rent, buy, sell and even think about home.

Both renters and buyers face challenges in finding a place to call home, and the Zillow Group Consumer Housing Trends Report 2017 is a deep dive into understanding them.

We surveyed over 13,000 people to determine how Americans rent, buy, sell and think about real estate. Below, we break down some of the most surprising results.

Renters

More Americans are renting today than in recent decades — some by choice and some simply due to market conditions.

Thirty-seven percent of American households are renters — about 43.7 million homes — which is an increase of 6.9 million homes since 2005.

While part of this increase is due to the 8 million homes lost to foreclosure during the recession, renters today also prize the maintenance-free and flexible lifestyle renting offers.

  • Renters skew younger — the median age of the typical renter is 32 years old.
  • Renters represent a more diverse population — 55 percent are white, 19 percent are African-American/black, 17 percent are Hispanic, 7 percent are Asian/Pacific Islander and 3 percent identify as another ethnicity.
  • Nearly half of renters are single, including a third who have never married.
  • Although the majority of renters are single, 78 percent live with others — most often this is another family member.
  • The median rent across the U.S. is $1,010, with the highest rents in the West and the lowest rents in the Midwest.
  • Renting can be expensive: 79 percent of renters who moved in the past year had a rent increase.
  • More than half of renters (57 percent) said a rent increase influenced their decision to move, and 37 percent of renters who aren’t moving say it’s because they can’t afford to.

Buyers

Buying is tough in all markets. For most Americans, it’s the biggest purchase they’ll ever make and an investment they’ll tap into as part of retirement.

In particular cities, purchasing a home has become a competitive game, complete with bidding wars and offer negotiations. It makes sense that most buyers rely on agents to help them through the process.

  • Today’s buyers have a median age of 40, although the majority (71 percent) of first-time buyers are millennials.
  • The median household income of the typical buyer is $87,500, and most buyers are married or partnered, relying on two incomes to purchase a home.
  • The typical purchased home in the U.S. costs $200,000 and has 3 bedrooms, 2 1/2 bathrooms and 1,800 square feet.
  • More than anything, buyers want their home to be in a safe neighborhood (71 percent) and in their price range (67 percent).
  • Other than safety, buyers also want to stay cool — 62 percent of buyers require their homes to have air conditioning.
  • Buyers take an average of 4.3 months to search for their new home — although millennials take just under four months (3.9 months), and silent generation buyers take 5.6 months.
  • The suburbs rule — 49 percent of buyers buy there, followed by 31 percent who buy in urban locations and just 19 percent who purchase in rural regions.

Sellers

Although some hot markets have favorable conditions for sellers, selling is still rarely an easy process.

Sellers have two main goals when they list their homes: sell their home in their preferred time frame and for their desired price. Balancing the two is a delicate dance, and most sellers are also buyers searching for a new home.

  • The median age of sellers is 45, although millennials make up nearly one-third of todays’ sellers.
  • Sellers have a higher median income than homeowners at $87,500.
  • The typical seller has lived in their home for 12 years.
  • Most sellers are selling for the first time (61 percent) and looking to buy at the same time (71 percent).
  • 76 percent of sellers have to make at least one concession to sell their home — and most often it’s a price reduction.
  • 1 in 2 sellers sell their home for less than the original listing price.

Homeowners

Owning a home is a lot of work. It’s also a great investment, especially in many of today’s markets where annual appreciation rates are higher than they’ve been in decades.

  • Homeowners are the oldest, with a median age of 57 years.
  • 14 percent of homeowners are millennials.
  • Homeowners have a median household income of $62,500, and 71 percent live with a spouse or partner.
  • 40 percent of homeowners have a pet (with dogs ranking in top at 30 percent).
  • Almost half of homeowners (46 percent) live in the first home they purchased, although this percentage decreases with age.
  • 86 percent of homeowners have no plan to sell in the next three years.
  • Less than a quarter of homeowners say their home is in “like-new” condition, and more than 60 percent say their home could use a little updating.
  • On homeowners’ to-do list for the next year: painting the interior (25 percent), improving the bathroom (22 percent) and landscaping (21 percent).

Learn more about today’s renters, buyers, sellers and homeowners in the Zillow Group Consumer Housing Trends Report 2017.

 Top featured photo from Shutterstock.

Related:

Source: zillow.com

How Much Is a Down Payment on a House?

In this article:

How much you’re required to put down on a house is determined by the type of loan you get, but it generally ranges from 3% to 20% of the purchase price of the home. Beyond lender requirements, it can be financially beneficial to increase your down payment to reduce the amount of your monthly mortgage payment. Offers with larger down payments can be more appealing to home sellers who are looking for buyers with a low risk of financing issues that could delay the sale – or worse, have it fall through.

What is a down payment on a house?

The down payment on a house is a portion of the cost of a home that’s paid in cash. The balance of the purchase price is usually paid by a loan you secure from a lender and pay back in a monthly mortgage payment. Down payments are expressed as a percentage of the total purchase price and the percentage you’re required to pay is dictated by the terms of your loan. Note that not all home buyers with financing are required to produce a down payment.

How much to put down on a house?

The ideal down payment amount is 20% of the purchase price of the home. Paying 20% up front reduces your monthly mortgage payments, can eliminate costly private mortgage insurance (PMI), can reduce interest rates and improves the competitive nature of your offer.

When trying to decide how much you should put down on a home, play around with a mortgage calculator to determine an amount that works best for your finances. As you explore, remember that in addition to your down payment, you’ll have some other up-front costs you’ll need to pay at closing, collectively called your escrow funds. It can include your closing costs, prorated taxes, title fees and more.

20% down reduces mortgage payment

The more money you pay upfront, the less you have to borrow from the lender, and the lower your monthly payment will be.

Example: Let’s say you buy a $300,000 home at a fixed rate of 4.25%.

  • With a 20% down payment ($60,000), you’d borrow $240,000, and your monthly payment would be $1,548.
  • With a 5% down payment ($15,000), you’d borrow $285,000, and your monthly payment would be $1,950.

20% down eliminates private mortgage insurance (PMI)

When you put 20% down, that means you own 20% of your home. This allows you to avoid paying PMI, which is a monthly charge that’s rolled into your mortgage payment to protect the lender from what they see as a riskier loan.

Example: If you buy the same $300,000 home noted above, with 5% down, your PMI payments each month would be $181 until you own 20% of the home and refinance into a loan without PMI.

mortgage payment breakdown based on down payment of 5% or 20%

Example of the benefits of putting 20% down on a $300,000 home purchase with a 4.25% interest rate on a 30-year fixed mortgage.

20% down improves mortgage rates

Buyers purchasing with a 20% down payment can often get better interest rates. A higher down payment is considered a sign that you’re financially stable, and thus a less risky borrower in the eyes of your lender. Overall, your risk is determined by three key factors: your debt-to-income ratio, your credit score and your loan-to-value ratio. The more money you put down as part of your down payment, the stronger your loan-to-value ratio.

For example, if you borrow $240,000 on a home that’s worth $300,000, like our example above, you have a loan-to-value (LTV) ratio of 80%, or $240,000 divided by $300,000. The lower the percentage, the better.

20% down makes your offer more appealing to the seller

In a competitive market, a larger down payment can make your offer more appealing to a seller, as they feel confident that you won’t have financing issues at closing that could cause the sale to fail.

What is the average down payment on a house?

The typical down payment on a mortgaged home in 2019 was 10-19% of the purchase price of the home. While 20% is the traditional down payment amount, 56% of buyers put down less than 20%, according to the Zillow Group Consumer Housing Trends Report 2019.

Here’s a breakdown of down payment percentages from buyers who purchased homes with a mortgage in 2019:

  • 20% of buyers have a down payment of more than 20%
  • 19% of buyers have a down payment of 20%
  • 21% of buyers have a down payment of 10-19%
  • 9% of buyers have a down payment of 6-9%
  • 17% of buyers have a down payment of 3-5%
  • 10% of buyers have a down payment of less than 3%
  • 5% of buyers don’t remember the size of their down payment

Younger buyers are more likely to purchase a home with less than 20% down. Sixty-two percent of Gen Z and Millennial buyers make a down payment of less than 20%. And 60% of Gen Xers do the same. Far fewer Boomers and Silent Generation buyers put down less than 20% down, just 42%.

What is the minimum down payment for a house?

The minimum down payment for a house depends on the loan you’re using to finance the purchase. Some people may be able to qualify for loans with 0% down, but loans with 3% down or 3.5% down are common. Lower down payment loans, including the 3.5% FHA loan, are designed to make homeownership more attainable for first-time buyers.

Keep in mind that even if you finance with a loan that allows a lower down payment, you’ll usually still have to pay closing costs out of pocket. There are a few 0% down loan types that will roll all costs into the mortgage, but they can be hard to come by.

  • Conventional loan minimum down payment: 3%
  • FHA loan minimum down payment: 3.5%
  • VA loan minimum down payment: 0%
  • USDA loan minimum down payment: 0%

What are the zero-down payment mortgage options?

For most zero-down payment home loans, there are certain criteria buyers have to meet, and many people don’t qualify. Certain groups like health care workers, educators, protectors, veterans and households with disabled members can qualify for specific programs. Requirements vary, but many of these programs are available to first-time buyers or those who haven’t owned a home for at least the past three years. The home they’re buying usually has to be their primary residence, too.

Down payment assistance program: These programs allow buyers to take out a second mortgage to cover the cost of their down payment, sometimes with benefits such as zero percent interest and deferred payments. These programs are usually run by government agencies or nonprofits.

Below-market first mortgages: Also known as first-time home buyer programs, these are below-market interest rates with reduced closing costs or fees. They’re typically funded by state housing finance agencies as a way to help lower up-front and ongoing costs for first-time buyers.

Tax credit or mortgage credit certificate (MCC): The MCC is a tax credit that allows first-time home buyers to offset a portion of their mortgage interest, up to $2,000 per year, which also helps buyers qualify for a loan because it counts toward monthly income.

For more information about down payment options, read about the benefits and find resources in the Mortgage Learning Center.

If you’re concerned about applying too much of your savings on a down payment and not having enough cash for costly home repairs, consider buying a Zillow-owned home. Our properties are evaluated, repaired and brought to market as move-in ready homes.

How to save for a down payment on a house

Saving enough for a down payment can be one of the biggest hurdles to homeownership. According to the Zillow Group Report, 22% of buyers said saving for a down payment is difficult or very difficult. And, it can take a long time. Buying a roughly $220,000 home and saving about 10% of the median annual income, buyers today need more than 7 years to save a 20% down payment.

Most buyers save the traditional way, tucking away a little money from each paycheck, and 55% of buyers say they made some kind of financial sacrifice to buy their home.

how the average home buyer sources their down payment

Saving strategies

Minimize your life: Take a look at your spending and belongings with a critical eye. Do you have unused belongings you could sell? Perhaps empty out that storage unit to avoid the monthly charge?

Spend less: Cutting back on indulgences like dining out, cable TV or coffee shop drinks. Twenty-five percent of buyers say they reduced their spending on entertainment to afford their home purchase, and 16% report postponing or canceling vacation plans.

Earn more: Eighteen percent of buyers picked up additional work to buy their home, whether that is starting a side hustle, taking on extra shifts at work or reducing time off.

Ask for help: Buyers also ask friends and family for assistance, even using birthday cash or wedding money as part of their down payment. Thirty-four percent of buyers with a mortgage report using a gift or a loan from friends and/or family for their down payment, accounting for 15% of the average mortgage buyer’s down payment.

First-time home buyer down payments

According to the Zillow Group Report, almost half of all home buyers (45%) are first-time buyers. While most repeat buyers can apply the equity from the home they’re selling to their new home, it’s more challenging for first-time home buyers to get the money they need to secure a down payment.

This may be why using gifts or loans from friends and/or family is more common among first-time mortgage buyers at (43% report using it for at least a portion of their down payment).

Down payment gift rules

If you’re planning on using gifted money as part or all of your down payment, it’s important to realize that there are restrictions and documentation requirements.

First, your lender will need to know the source of your down payment money. Expect your lender to evaluate your past 3+ months of banking activity. Keep a paper trail of any large transfers so you can accurately account for any deposits that occur during this time period.

Your lender will also want to confirm that the money you’ve been gifted is in fact a gift, and isn’t a loan from a friend or family member that’s expected to be paid back. Additional loans affect your debt-to-income ratio and potentially make you a riskier borrower. Here are the things your lender will look for:

Relationship of gifter: Generally, gift money needs to come from a family member, spouse or partner.

Down payment gift letter: Lenders will often require that the donor write a letter that clarifies your relationship, documents the amount of the gift and the source of the gift, confirms contact information, and documents the address of the property. It also should document that the gift is a gift, and not actually a loan.

Gift money loan requirements: Not all loan types will allow you to make a down payment with 100% gift funds, especially if the home will not be a primary residence. Check with your lender to confirm the minimum borrower contribution from your personal funds for the home you plan to buy.

Source: zillow.com

Rising Rents, Stagnant Wages, and the Burden of Unstable Housing

With rents rising and wages stagnant, affording rent can be an insurmountable burden.

While homelessness may not be viewed as a looming issue for those who are financially stable, it’s not as distant as some might think.

With rents rising faster than wages, the burden of affording rent is looming larger and larger for many Americans and, in, some cases becoming insurmountable.

According to the Zillow Group Consumer Housing Trends Report 2017, 79 percent of renters who moved in the last 12 months experienced an increase in their monthly rent before moving to a new place. And over half (57 percent) said that hike was a factor in pushing them out the door and into another rental. Only 21 percent of renter households didn’t report experiencing a rent increase.

Nearly a third (30 percent) of households nationwide, representing roughly 73 million adults, report they’re struggling or just getting by financially. And it’s no wonder; Americans spend on average a median of 29.1 percent of their income on rent, including many who spend a higher percentage but have lower incomes.

Increasingly, major metro areas are becoming out of reach for those who aren’t earning more than minimum wage, and this is becoming increasingly true even in markets that have historically been more affordable.

Take Houston, for instance, where the median low-income earner spends 65.1 percent of their income on the median bottom-tier rent. Then there’s notoriously expensive New York, where — along with San Francisco and Los Angeles markets — the median low-income wage will not even cover a low-end apartment. In New York alone, to afford apartments with median bottom-tier rents, renters need to shill out 111.8 percent of the median low-income wage.

With such large percentages of household incomes going toward rent, saving for the future is less of a priority — and a possibility. More than half (51 percent) of Americans say they don’t have enough money saved to support themselves for three months, according to a Zillow analysis of the Federal Reserve Board’s 2016 Survey of Household Economics and Decision-making.

Millions struggle to afford stable housing

According to the Zillow Group Report on Consumer Housing Trends 2017, today’s median household income for renters is $37,500, which equates to about $18 per hour — or 2.5 times the federal minimum wage of $7.25. Nationwide, in 2016, 2.2 million people lived off wages at or below the federal minimum wage, according to the U.S. Bureau of Labor Statistics.

When it comes to renting, there is no state where a 40-hour minimum wage is enough to afford a 2-bedroom apartment, according to the National Low Income Housing Coalition.

While renting is becoming increasingly more difficult, buying a home becomes a distant dream.“Honestly, if you’re making $37,500 per year and have no savings, it’s probably not feasible for you to buy in most markets,” Zillow Chief Economist Dr. Svenja Gudell says.

Across all states, the median renter can expect to pay $1,430 per month on rent. It’s no wonder many Americans are struggling financially — particularly in New York, Los Angeles, Washington D.C., and Seattle, where there’s also a stronger relationship between rising rents and an increase in the homeless population.

Homelessness by the numbers

Coast to coast, there are an estimated 550,000 homeless people, according to the U.S. Department of Housing and Urban Development.

But Zillow Research used statistical modeling to estimate the uncounted homeless population, unsheltered homeless people often missed during the One Night Counts, to estimate the true number of homeless people, a number much higher than the official estimates. And as rents climb, the numbers will only grow, especially in large, tight metros, where the rent burden can become life-altering.

Take New York City, for example. The metro has the largest population of homeless people in the nation. Last year, there were an estimated 76,411 people experiencing homelessness, according to Zillow’s estimates. If rents were to rise 5 percent, an additional 2,982 people would be forced to the streets.

And Los Angeles doesn’t fare much better. Given the same rent hike, an additional 1,993 people would fall into homelessness. And a rent hike of 5 percent isn’t implausible, especially given that in L.A., rents rose 4.4 percent over the past year.

The geography of social mobility

Right now in L.A., renters dish out $2,707 per month for the median rent, which is almost twice the national median rent and amounts to nearly half of the median household income in the metro. With such a substantial chunk of money spent every month on rent, it’s no surprise the metro has an estimated 59,508 people without a home.

But rents haven’t always been so unaffordable. Just 17 years ago, three of the top 20 metros were rent-burdened, meaning renters paid more than 30 percent of their income on living expenses. Today, however, the number of cities that have become unaffordable have grown exponentially.

Currently, renters in nine of the same top 20 metros can expect to spend 30 percent or more of their income on rent. The biggest share spent on rent comes from Los Angeles, where renters pay nearly half (49 percent) of their income on rent.

“The places where social mobility — the ability to climb the income ladder — is the greatest are now in places that are unaffordable for most people,” said Gudell. “San Jose or the Bay Area in general, parts of Boston, for example — these places have gotten to be so expensive that a lot of people who have an income of $37,500 a year will not be able to buy a home or even afford a family-sized rental.”

The costs of housing instability go beyond financial

Unfortunately, for too many, lack of affordable housing can complicate other critical aspects of life, including health and future livelihoods.

Individuals living in shelters are more than twice as likely to have a disability compared to the general population. This includes serious mental illnesses, conditions related to chronic substance abuse, diabetes, heart disease and HIV/AIDS, according to the U.S. Department of Housing and Urban Development.

Gudell says people have better outcomes when they aren’t constantly moving from place to place.

“It’s been shown that you have better outcomes if you live in a stable environment with less frequent moves, which is easier to attain when you own versus rent,” Gudell said. “So, if you take stable environments away from people, their outcomes will most likely be worse than they are today, and that has an impact on education, on health and on income growth in the future.”

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Source: zillow.com