3% Mortgage Rate vs. a 3% Down Payment: Which Path Builds More Wealth?

With the 30-year fixed mortgage rate averaging 6.65%, many prospective buyers are waiting for rates to drop before buying a home. But experts warn that a significant drop isn’t likely any time soon.Mortgage rates hovered around 3% and even hit an all-time low of 2.65% during the pandemic after the Federal Reserve slashed the federal funds rate to keep the economy from collapsing.But that didn't last. The Fed began hiking rates in March 2022, and mortgage rates have been climbing since. Realtor.com® senior economist Jake Krimmel says the odds of rates dropping that low are essentially zero. “If there’s one thing I’d put at basically a 0% probability, it’s mortgage rates getting back to 3% any time soon," he notes.But perhaps there is an alternative.For Californians exploring homeownership options, a proposed statewide down payment assistance program could offer an alternative path to help them get into a home sooner.California voters will decide this November on Proposition 37, which would let middle-income residents borrow up to 17% of a newly built home's purchase price, bringing the minimum down payment to just 3%. The loan would function as a secondary mortgage, paired with a pr...