Almost No One Is Underwater on Their Mortgage Right Now. Here Is Why That Should Reassure a New Buyer.
A new study found fewer than two percent of mortgaged homes are worth less than their loan, the lowest level in memory. That statistic sounds like it is about current owners. It is actually one of the most reassuring facts a nervous first-time buyer could hear. Here is why.
If the memory of 2008 is part of why you have hesitated to buy, this is worth reading. Back then, millions of homeowners owed more on their mortgage than their home was worth, a situation called being underwater, and it wrecked a lot of financial lives. A new study looking at the start of this year found that fewer than two percent of mortgaged homes are underwater today. In the report’s own words, negative equity has become a near-obsolete concern. That is not just good news for people who already own. It quietly removes one of the biggest fears standing between renters and their first home.
Source: Cotality Homeowner Equity Insights Report, first quarter data, 2026.
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1.9%
of all mortgaged homes are underwater, near the lowest level on record
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$310,500
the average equity cushion a mortgaged homeowner is now sitting on
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Why this speaks directly to a first-time buyer
The number one fear that keeps cautious buyers renting is some version of what if I buy and the value drops and I am stuck. That fear is reasonable, and it is exactly what the underwater rate measures. When almost no one is underwater even after years of a shifting market, it tells you that homeowners today are sitting on real cushions, and that home values would have to fall suddenly and steeply for widespread trouble to appear. Cotality noted it would take a precipitous, unexpected drop for negative equity to become a concern again. That is a very different backdrop than the one that scarred the last generation of buyers.
What the cushion actually does for you
As you pay down your loan and your home holds or grows in value, you build the same kind of cushion. It is the buffer that means a normal dip in the market does not put you underwater, and it is the reason ownership tends to strengthen your finances rather than threaten them.
Starting with a small down payment means starting with a thin cushion. In a market where values are broadly supported and underwater rates are near record lows, that thin start is far less risky than it was in the years before the last crash. It is one reason low-down and zero-down paths are reasonable for the right buyer today.
Equity is what lets you refinance, tap funds for a real need, or sell and move on your terms down the road. Every month of ownership tends to build a little more of that freedom, the same freedom today’s owners are enjoying.
Two caveats keep this honest. First, equity is not evenly spread. Some regions hold enormous cushions while others hold far less, and a handful of areas even saw equity slip recently, so your local picture matters more than the national one. Second, no one can promise values only rise, which is exactly why buying with a realistic budget and a plan to stay put for a while remains the smart approach. The point is not that prices can never fall. It is that the catastrophic, widespread negative-equity scenario people still fear is, by the current data, remarkably rare.
If you have hesitated to use your VA benefit because buying with nothing down felt risky, this data should ease that worry. Starting with little equity is far safer in a market where underwater rates are near record lows, and your benefit is built to get you in the door and building equity of your own. Buy with a sound budget and a plan to stay a while, and the cushion starts working for you from day one.
The bottom line
The equity cushion homeowners are sitting on is not just their good fortune. It is a signal about the ground you would be buying on. With underwater mortgages near record lows, the single scariest what-if that keeps renters on the sidelines is, right now, extraordinarily unlikely. That is not a reason to overpay or overreach. It is a reason to stop letting an old fear make a decision the current data does not support. Buy within your means, plan to stay a while, and let equity start building for you, right here across the East Valley.
This article is for general educational purposes and is not a commitment to lend or financial advice. Equity and negative-equity figures cited reflect Cotality data for the period noted and describe national and regional conditions; home values can rise or fall, equity varies significantly by area, price point, and property, and past trends do not guarantee future results. Buying with a low or no down payment carries a higher risk of negative equity if local values decline. Getting pre-approved does not guarantee loan approval. VA loan eligibility and benefits depend on individual circumstances. CrossCountry Mortgage is a private lender and is not acting on behalf of, or at the direction of, the U.S. Department of Veterans Affairs. Equal Housing Opportunity.
