Home buyers have a bit of good news: down payment amounts are beginning to decrease. While mortgage underwriting guidelines have not changed, the trend of lower down payments could be a sign of improving lending environments. Here are the numbers, per RISMedia:
The median down payment amount during 2010 and 2011 was 11%. First-time buyers put down an average of 5%, while repeat buyers put down an average of 15%. This was a vastly different lending environment from the zero-down days of 2005-2007, when first-time buyers averaged only a 2% down payment, with nearly half of them having no down payment at all.
After the downturn of the housing market, the over-correction by the banking industry became a bane to home buyers. Higher credit score criteria and high down payment requirements became a one-two punch that kept some qualified buyers out of the market.
Fortunately, down payment averages in 2012 point towards improving lender confidence. First-time buyers put down an average of 4% in 2012, while repeat buyers put down 13%. This gives us a median down payment of 9%.
How much of a down payment is actually required depends on the type of mortgage, and the strength of your overall credit and income data. Most mortgages today are written with Freddie Mac and Fannie Mae guidelines in mind. Your down payment could be as little as 5% of the purchase price. However, if your down payment is less than 20%, you will be required to have Private Mortgage Insurance (PMI) added to your payment.
FHA-backed mortgages require as little as 3.5% down. Again, you will have mortgage insurance required if your total down payment is less than 20%.
Should you wait to build a larger down payment before buying your Chevy Chase home? This is a personal decision and depends how adverse you are to the idea of paying PMI. But when home prices are on the rise, you may find your down payment funds running behind the pace of the market.
It’s best to speak to a reputable mortgage lender in advance, who can identify your borrowing strength. Keep in mind that lenders can ask for larger down payments than the stated minimums, in order to provide you a lower interest rate, or make your loan more salable to the secondary market.
As your Chevy Chase real estate professional, I would be happy to refer you to good lenders in our area! If you are thinking of buying or selling a home in Chevy Chase, MD, turn to me for the professional guidance you can trust. My experience with the Chevy Chase real estate market, and my commitment to client service, will give you the advantage in today’s competitive market!
Contact me today for help with all of your real estate questions!
Melinda Estridge
The Estridge Group-Long & Foster Real Estate, Inc.
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