Home buyers showed the money in 2014. The share of buyers using low down payment loans plunged to an 11-year low last year, according to a new analysis of nearly 20 million purchase loans for single-family homes and condos nationwide.
Low Down Payment Loans Return
In 2014, 25 percent of home buyers using conventional or Federal Housing Administration loans put less than 3 percent down when purchasing a home – that’s down from 37 percent in 2006 before the housing crisis, RealtyTrac reports in its analysis.
So how much did home buyers put down? In 2014, the average down payment percentage was 15.4 percent, averaging $58,496 on an average purchase price, according to RealtyTrac’s data.
The average percentage down payment over the last decade has hovered in the 13 percent and 15 percent range, according to RealtyTrac. But down payments reached an 11-year high in 2013 when it reached 15.6 percent, as the housing rebound was occurring, says Daren Blomquist, RealtyTrac’s vice president.
That means in 2013 on an average purchase price of $291,428, and an average loan amount of $232,527, that translated into an average down payment of $58,900 – the highest of any year since 2004. The average down payment fell only slightly in 2014 to $58,496, for comparison.
Not surprising, the report also confirmed that lower down payment buyers tend to be first-time, entry level buyers. For home purchases with a down payment of less than 3 percent (but more than 0 percent), the average sales price was $190,304. On the other hand, in 2014, borrowers who put down 50 percent or more tended to have an average sales price of $502,213.
Senior loan officer Kathleen Kramer with JMJ Financial in California says it’s too early to tell if the recent changes by mortgage-finance giants Fannie Mae and Freddie Mac to allow 3 percent down payment loans will make an impact. Currently, she says there hasn’t been too much activity on the loans yet because they still have strict requirements on who can qualify for them. However, recent changes with the FHA in lowering its annual mortgage insurance premiums by 0.5 percentage points – a savings of about $900 annually to borrowers – has already shown to have an imprint, she says. The move by FHA, which took effect at the end of January, has sparked a string of refinancers and purchasers due to the loans now being cheaper and more affordable to get, Kramer says.
Source: “Share of Low Down Payment Loans at 11-Year Low,” RealtyTrac (Feb. 17, 2015)