In a normal housing market, down payments are mostly an issue of personal preference and comfortability. However, in this current cycle, Nicole Friedman & Ben Eisen at The Wall Street Journal write that borrowers putting less money down are being left behind…
- 20% down has become the floor. According to the National Association of Realtors, half of existing home buyers put 20% down in April. “In 10 years of record-keeping, that percentage has hit or exceeded 50% three times, and all have been since last fall.”
- A seller’s market. “Cash buyers have an advantage because they don’t need to secure mortgages, which can make the transaction go faster. Sellers sometimes worry that offers with smaller down payments are likelier to fall through during the loan-closing process, agents say.”
- Pricing families out of the market. Danyell Allen of Cedar Park, Texas, felt ready to buy and had saved up for a 5% down payment. Her children wanted to paint their walls and adopt a pet, which they can’t do in their rental house. “But after losing out on more than 10 offers, she called off the search. ‘The lowest I heard I was beat out on any home was $30,000 over asking price…That’s not something I can do.'”