Most Americans who want to buy a home next year can't afford a 20% down payment

• Most Americans who plan to buy a home next year can't afford a down payment, according to Zillow.
• The median prospective homebuyer has a total of $29,000 in all accounts — enough for an 8% down payment.
• There aren't enough homes on the market for everyone who wants to buy one, Zillow said.

Many Americans who want to buy a home can't afford a typical down payment of 20%.

The median prospective homebuyer has a total of $29,000 in their savings, checking, investments and retirement accounts, according to Zillow's 2023 Consumer Housing Trends Report. This amounts to 8% of the typical cost of a home, which Zillow estimated cost nearly $350,000 as of July 31.

About a third of people who took out a mortgage in 2023 drew from their retirement funds, Manny Garcia, Zillow's senior population scientist, told Insider.

It's harder for those who don't have much cash on hand to secure one of the limited amount of homes available. Of the nearly quarter of Americans who are looking to purchase a home in the next year, only 37% told Zillow that they currently had saved up enough for a down payment.

"There are about 54 million Americans who said they intend to buy a home — that represents 34 million unique households," Garcia said. "But we know from historic data on home sales that no more than 6 million homes have come on the market in any given recent year."

"Frankly there just aren't enough homes on the market for everyone who wants to buy one," he added.

Down payment requirements can range from 0% to more than 20%, Insider previously reported, and in America's 20 biggest cities, a 20% down payment ranges from $39,859 in Oklahoma City to $260,849 in San Jose, California.

Zillow found just over half (56%) of prospective mortgage buyers said they planned to put down less than 20% on the home they intend to buy and among prospective buyers that say they have saved up enough for a down payment, that amount is higher - typically $59,000 (enough for about 17% down).

This comes as banks are tightening qualifications for mortgages.

During 2023, the majority of people who successfully got a mortgage put down 20% of the cost of the home, according to Zillow. That is more than it has been in past years, according to the report.

Total down payments are not the only thing to consider when it comes to affordability. If someone scores a mortgage with a lower down payment, monthly costs go up.

"You might have been able to have a pretty good monthly payment on 3% a year or two years ago, but that's no longer true," Garcia said of rising mortgage rates.

Those bills are important to consider, according to Insider's personal finance desk, which suggests that homebuyers live off one paycheck, and that they consider monthly expenses when deciding if a home is affordable.

The survey was conducted by Zillow Group Population Science of more than 11,800 prospective buyers nationally between April and July 2023, and defined "prospective buyers" refers to household decision makers 18 years of age or older who intend to buy a home in the next year.