Down payments becoming more affordable for homebuyers

Down payments on home purchases across the nation are getting smaller again after years of increases following the burst of the housing bubble, according to a new report from RealtyTrac.

According to the real estate analytics site, the average down payment in the first quarter represented 14.8 percent of the purchase price, compared with 15.5 percent early in 2014.

“Down payment trends in the first quarter indicate that first-time homebuyers are finally starting to come out of the woodwork, albeit it gradually,” RealtyTrac VP Daren Blomquist said in a press release.

“We don’t track first-time homebuyers, but as much of 40 percent of our business is less than 20 percent down. It’s been that for way quite some time,” said Rod Lake, chief residential lending officer at Arlington Bank.

In Franklin Country, RealtyTrac data showed, down payments represented 13.1 percent of the purchase price, below the national average, but that number is actually up from 12.1 percent during the first quarter of 2014.

RealtyTrac also said Federal Housing Administration loans as a share of all loan originations increased throughout the quarter, from 21 percent in January to 22 percent in February and 25 percent in March.

Lake said he’s seeing this trend in Columbus as well because the FHA insurance program’s premiums went down in January.

RealtyTrac said low down payment loans, with a loan-to-value ratio of 97 percent, accounted for 88 percent of home purchases from FHA loans in Franklin County.

Some are worried an increase in low down payments purchases could be risky, while others see it as a positive for the market as long as qualifying for mortgages remains stringent.
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“The dangers of interest-only, negative-amortization, and low, low credit score loans are not a part of today’s low down payment programs,” Craig King, COO at Chase International brokerage, covering the Lake Tahoe and Reno, Nevada, housing markets, said in the RealtyTrac release. “Without those types of high-risk components, low down payment loans are a sound strategy.”

Lake agrees.

“The public needs to know you can buy a house with less than 20 percent down,” he said.