Median Mortgage Down Payment Increased to 22 Percent Last Year

February 16, 2011 No Comments »

zero down

The median down payment on conventional mortgages in nine major U.S. cities increased to 22 percent last year, according to an analysis performed for the Wall Street Journal by Zillow.

It’s the highest median down payment since the data was first tracked back in 1997, before the latest housing boom and subsequent bust.

The median down payment has doubled in just three years, partially because banks and mortgage lenders have called for more “skin in the game” from homeowners.

And now the government wants to increase the minimum down payment on mortgages guaranteed or purchased by Fannie Mae and Freddie Mac to 10 percent.

However, most borrowers who wish to put little down opt for FHA loans, which only require a 3.5 percent down payment.

Such loans accounted for about half of all purchase money mortgages last year, according to housing-research firm Zelman & Associates.

But to curb over-reliance on the FHA, the agency announced this week that it would raise the annual mortgage insurance premium on the government-backed loans by another 0.25 percent.

Of course, this means FHA borrowers will only pay roughly $30 more each month, which probably won’t deter too many prospective home buyers from the loan program.

Fortunately, an estimated $3 billion will go toward the FHA’s depleted capital reserve annually as a result of the increase.

Low and no money down mortgages were one of the many causes of the latest mortgage crisis, leaving scores of underwater homeowners in their tracks.

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