RealtyTrac: Average Down Payment Dropped To Three-Year Low In Q1

Posted by Patrick Barnard on June 10, 2015 No Comments
Categories : Residential Mortgage

The average down payment on a single-family home in the U.S. was about 14.8% of the purchase price in the first quarter – down from 15.2% in the fourth quarter and down from 15.5% in the first quarter of 2014, according to RealtyTrac's U.S. Home Purchase Down Payment Report.

Driving the average down payment lower is the fact that lenders have been loosening standards for about the past year. In fact, government sponsored enterprises Fannie Mae and Freddie Mac recently launched programs allowing lenders to originate agency-backed loans at 97% loan-to-value ratio (i.e., for as little as 3% down).Â

As a result, the share of low down payment mortgages in the first quarter increased to 27% of all originations – the highest level in two years.

The average down payment was $57,710, up slightly from $57,618 in the fourth quarter and down slightly from $57,992 in the first quarter of 2014. The average down payment for Federal Housing Administration (FHA) loans was $7,609, while the average down payment for conventional loans backed by Fannie Mae and Freddie Mac was $72,590.

The report also shows that the average down payment for FHA purchase loans originated in the first quarter was 2.9% of the purchase price while the average down payment for conventional loans was 18.4% of the purchase price.

‘Down payment trends in the first quarter indicate that first time homebuyers are finally starting to come out of the woodwork, albeit it gradually,’ says Daren Blomquist, vice president at RealtyTrac, in a release. ‘New low down payment loan programs recently introduced by Fannie Mae and Freddie Mac, along with the lower insurance premiums for FHA loans that took effect at the end of January are helping, given that first time homebuyers typically aren't able to pony up large down payments.

‘Also helping tilt the balances toward first time homebuyers in the first quarter is less competition from the large institutional investors that have been buying up starter home inventory as rentals,’ Blomquist adds.

Low down payment loans accounted for 83% of FHA purchase loans originated in the first quarter, while 11% of conventional loans were low down payment loans, the report reveals.

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