Banks Want Home Buyers To Actually Put Down (More) Cash

Posted By on February 15, 2011

This was a no brain’er, sooner or later you just knew the banks were going to want a larger down payment on the purchase of a house.  How novel to think it might improve delinquencies….Inquiring minds say Duh. 

By S. MITRA KALITA    (From The Wall Street Journal)

The down payments demanded by banks to buy homes have ballooned since the housing bust, forcing many people to rethink what they can afford and potentially shrinking the pool of eligible buyers.

Last week, the Obama administration called for gradually raising down payments to a minimum of 10% on conventional loans, meaning those that can be bought or guaranteed by mortgage giants Fannie Mae and Freddie Mac. And mortgage data show that private lenders are already pushing sharply higher the required down payments, mainly to mitigate their risk as home prices continue to fall.

The median down payment in nine major U.S. cities rose to 22% last year on properties purchased through conventional mortgages, according to an analysis for The Wall Street Journal by real-estate portal That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.

Higher borrowing costs and heftier down payments could send housing prices falling further. Last week, 30-year fixed mortgage rates rose to 5.05%, their highest level since April. “If there is a scenario where the government talks about raising down payments to 20%, you would absolutely crush the housing market,” said Peter Norden, chief executive of Real Estate Mortgage Network Inc.

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