Has the 20% Down Payment Returned? - Quicken Loans Zing BlogThe days of zero-down mortgages are miles behind us, along with the standard 20% down payments.  Or so we thought?

MSN Money’s Liz Weston recently reported a growing likelihood of the mortgage market returning to the 20 percent norm.  Consumers often receive misconstrued information regarding home loans, one of the most inaccurate concepts being, that a potential buyer must have 20 percent of a home price saved before purchasing.  While most mortgage insurers stray from writing policies for down payments equal to less than 20 percent, select home loans are still backed by low initial payments.  Veterans qualify for zero-down offers and FHA-backed loans start at just 3.5 percent.  Bob Walters, chief economist here at Quicken Loans, lent his expertise:

“If you have a bit more put aside — say, 5 percent — you might be able to qualify for a conventional loan, which is what the mortgage trade calls loans that are sold to Fannie Mae or Freddie Mac.  But that’s only if home prices in your area aren’t falling off a cliff. In so-called declining markets, a 10 percent down payment would be required.”      

If 20 percent down seems excessive, view it instead as a savings target. Consider the drawback of paying less up front:

“In many ways, bigger is better. If you can scrape together 20 percent, for example, you would be able to avoid mortgage insurance. A bigger down payment typically wins you a lower interest rate, which would make your loan cheaper.”

Much of the question of a universal increase in down payment standards weighs heavily on decisions made by lobbyists on Capitol Hill, along with the troubled state of the private mortgage insurance market.  As politicians are calling for a dismantling of Fannie Mae and Freddie Mac after their corrupt loans, pundits expect that mortgage lenders would likely become increasingly conservative about lending money.  Bank regulators are anticipating a 20 percent down payment requirement, while lender lobbyists are coercing a significantly lower 10 percent.

Whether Fannie and Freddie meet their demise or if 20 percent becomes the standard, access to FHA loans will still be available to those seeking a low down payment option.

Read the full article on MSN Money.


Stephanie Koske writes for Quicken Loans and loves that it’s one of the most amazing places to work.  Check out the Quicken Loans YouTube page and learn more about what it’s like to work at QL.

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