WSJ: Home Buyers Will Need to Put More Money Down

by UrbanTurf Staff


Last week, the Obama administration put forth a proposal that called for raising the minimum down payment to qualify for a conventional loan to 10 percent of the purchase price of a home. And that 10 percent number actually seems low compared to what banks in major cities are now requiring based on data reported in a Wall Street Journal article this morning:

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 Zillow.com. That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.

While the article points out that the measure by banks to require more money down is aimed to shield them from risk, the combination of that move and increasing mortgage rates could have a negative effect on the recovery of the country housing market.

Read the full article here.

See other articles related to: the wall street journal, obama, mortgages, mortgage rates

This article originally published at http://dc.urbanturf.com/articles/blog/wsj_home_buyers_will_need_to_put_more_money_down/3003


  1. Wondering said at 11:48 am on Wednesday February 16, 2011:

    I’m curious what is happening in the DC market in terms of down payment trends.  I plan on buying later this summer/fall, so haven’t talked to lenders quite yet to see options.  Realistically I’ll have more like 10% to put down on a conforming loan, excellent credit (800), 160+k income, current renter.  I know FHA might be an option, but more curious about what terms people are seeing out there.

  1. HomeEconomics said at 12:05 pm on Wednesday February 16, 2011:

    Does it really matter when the conventional market has practically ceased to exist?

    Any property that can’t get FHA/VA approved is sitting on the market for an eternity.

  1. Jean said at 12:08 pm on Wednesday February 16, 2011:

    It seems like your debt to income ratio and your credit score are the most important things.  This article surprised me because I just got preapproved with a large bank to buy in DC (first time buyer). I had no trouble at all getting preapproved for a conventional mortgage (not FHA). Whether I do 10% or 20% down is up to me, but I’ll pay slightly higher interest if I put less down.

  1. dcfirsttimebuyer said at 1:10 pm on Wednesday February 16, 2011:

    I’ve been told regardless of whether i use an FHA loan or a conventional loan, I’ll need to carry mortgage insurance until I have 25% equity in the property. Can someone explain mortgage insurance to me? It feels like a needless payment to the bank…

  1. JohnDC said at 1:46 pm on Wednesday February 16, 2011:


    People that have zero percent in a home are more likely to walk away & default. PMI (mortgage insurance) is paid by the buyer to help offset costs accrued by the bank if the owner defaults on the loan.

    Chances are if you have 25% equity in your home you’re going to sell and not walk away and default so the bank should get paid back. It’s always been 20% down as far as I knew. You can also take a second loan at a higher interest rate to make up the difference.

  1. John2 said at 2:17 pm on Wednesday February 16, 2011:

    @dcfirstfimebuyer—Might want to shop around for your loan.  I close next week with a 10% conventional loan and the fine print on getting rid of PMI (isn’t there a law to cover this now?) says that once I reach 20% quity of the original value of the property paid, I can request PMI to be cancelled and it is automatically cancelled upon reaching 22% of the original purchase price.  25% sounds wrong and a bad deal.

    @JohnDC—Second mortgage loans/HELOCs, etc don’t seem to exist anymore.  My loan officer almost laughed at the suggestion—it’s definitely not 2007 anymore.  It seems to be PMI or 20% down now.


  1. Jean said at 3:49 pm on Wednesday February 16, 2011:

    Hmm… I was told I don’t have to carry PMI for less than 25% equity, but again maybe that’s due to my income.  And 2 weeks ago, Bank of America offered me a second loan for the remaining 5% I may need to finance (right now I only have 15% in cash- so I may or may not use it, depending on when I buy).  Sounds like you need to shop around and/or lower your price point.

  1. Paul said at 4:23 pm on Wednesday February 16, 2011:

    I really don’t see why anyone should ever be allowed to buy with less than 10% down.

  1. tds said at 4:36 pm on Wednesday February 16, 2011:

    I purchased a home last summer. An 80/10/10 loan that was replaced with a conventional 30yr loan at the last minute.  Apparently the second bank wasn’t interested in assuming the risk.
    On another matter, for a slightly higher interest rate, I had bank financed PMI so that I could deduct more of the interest on my taxes.  In light of pending legislation on the amount you can deduct for mortgage payments, was that really a good move? Do I have any options under these circumstances?

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