The down payments demanded by banks to buy homes have ballooned since the housing bust, forcing many people to rethink what they can afford and potentially shrinking the pool of eligible buyers.
Last week, the Obama administration called for gradually raising down payments to a minimum of 10% on conventional loans, meaning those that can be bought or guaranteed by mortgage giants Fannie Mae and Freddie Mac. And mortgage data show that private lenders are already pushing sharply higher the required down payments, mainly to mitigate their risk as home prices continue to fall.
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.
Wow! How novel! Requiring home purchasers to have “skin in the game” by making down payments and having them prove that they can actually repay the money that they borrow is a stunning throwback to a more benighted (if solvent) age of…gasp…personal responsibility. Heavens, just thinking about it gives me the vapors!