Cross River NY Real Estate | Down Payments Remain Elevated

Down payments greater than or equal to 20 percent were made by 34 percent of all residential home purchasers last month, a percentage that has remained relatively stable over the past year, according to the latest Realtor Confidence Index survey from the National Association of Realtors.

However, over the past several years, lenders have been raising down payment requirements. In 2011, median down payments for conventional loans were approximately 22 percent, according to Zillow. That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.

Both these surveys show higher down payment costs than NAR’s 2011 Profile of Home Buyers and Sellers, which is based n part on 2010 transactions. For both conventional and FHA loans, which require only a 3.5 percent down payment, NAR reported the median down payment for all buyers was 11 percent in 2010-2011. First time buyers put about 5 percent down in 2011. Repeat buyers, pooling equity with savings, typically put down about 15 percent. However, investment and vacation-home buyers have been paying higher down payments than those buying a primary residence. The median down payment for both was 27 percent, according to NAR’s Profile of Investment and Vacation Buyers.

In January, Lending Tree reported that states with the highest median down payments were Washington, D.C. (13.5 percent), New York (13.47 percent), Hawaii (13.33 percent) and California (13.22 percent). The state with the lowest average down payment is North Dakota, where buyers put down an average of 11.34 percent.

Attention has focused on down payments in recent months for two reasons. Down payments are a major barrier to first-time buyers, whose market share has dwindled since the home buyer tax credits expired in 2010. A survey of buyers by Move, Inc. last fall found that half of all potential buyers planning to buy in two years or more are waiting in part because they lack the money for a down payment or closing costs.

A second focus has been a proposed regulation called QRM that would create incentives for lenders to offer loans at 20 percent or more. The regulation, being reviewed by regulators, is opposed by many housing, consumer and minority groups concerned that it would put homeownership out of reach of many American families.