Last week, the Obama administration called for gradually raising down payments to a minimum of 10% on conventional loans, (those bought or guaranteed by Fannie Mae and Freddie Mac). Most private lenders are already demanding high 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, with some banks are pushing for as high as 30% down payments according to the WSJ. That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.
Options for borrowers lacking the down payment include alternative programs, such as loans for veterans or those backed by the Federal Housing Administration. FHA-backed mortgages, which require 3.5% up front, made up about half of loans for home purchases last year, according to housing-research firm Zelman & Associates, but borrowers often pay higher interest rates and must pay private mortgage insurance, often driving their monthly payments higher. Fewer Americans own homes now than in the last 13 years, and that decline is likely to continue. Is this the “new norm” in Atlanta real estate?
Toss into the mix a very very different atmosphere from the Atlanta real estate market in spring 2010; gone are the federal incentives to spur the market. There’s no doubt that last spring’s numbers were bolstered by them and the low rates. This spring, the mortgage approval process remains combative and rates continue to rise, now at the highest level in a year – and expectations are that they will tick up further. The banks are in a good spot, the bailout money did wonders for their bottom lines, now they can afford to be exceptionally picky with new loans made to the very taxpayers that bailed them out – is this a great country or what?
It’s obvious that not everyone can afford a home, the issue right now is the over-correction in the mortgage industry – I feel that banks are looking for reasons not to do loans. The applicants approved are the ones with significant skin in the game, which is fine. But not every good quality buyer can come up with 20%-30% down; 10% seems like a reasonable, attainable number.
Anyway – here’s an excellent 11 minute audio clip discussing this very topic with buyers that were caught in the crossfire. CLICK HERE