Down payments for home purchases dropping
Homebuyers are taking advantage of low down payment opportunities when purchasing a home in 2015. The average down payment has dropped to a three-year low.
The average down payment for buyers financing their home with an FHA loan during the first quarter was $7,609. For those using a conventional loan, the average down was $72,590.
RealtyTrac, a source for housing data, recently released its U.S. Home Purchase Down Payment Report, which shows the average down payment for single-family homes, condos and townhouses purchased in the first quarter was 14.8 percent of the purchase price, down from 15.2 percent in the previous quarter and down from 15.5 percent a year ago to the lowest level since the first quarter of 2012.
The report also shows that the average down payment for FHA purchase loans originated in the first quarter was 2.9 percent of the purchase price, while the average down payment for conventional loans was 18.4 percent of the purchase price.
The average down payment in dollars was $57,710 in the first quarter, up slightly from $57,618 in the previous quarter and down slightly from $57,992 in the first quarter of 2014.
The average down payment in dollars for FHA purchase loans originated in the first quarter was $7,609, while the average down payment for conventional loans backed by Fannie Mae and Freddie Mac was $72,590.
"Down payment trends in the first quarter indicate that first-time homebuyers are finally starting to come out of the woodwork, albeit gradually," said Daren Blomquist, vice president at RealtyTrac.
"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."
Q. Now that mortgage rates are rising, are applications down?
A. At last report from the Mortgage Bankers Association, applications are increasing. Perhaps the rising rates have persuaded buyers that rates are truly on the rise.
MBA noted that the Market Composite Index, a measure of mortgage loan application volume, increased 8.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 19 percent compared with the previous week.
The Refinance Index increased 7 percent from the previous week. The seasonally adjusted Purchase Index increased 10 percent from one week earlier. The unadjusted Purchase Index increased 20 percent compared with the previous week and was 15 percent higher than the same week one year ago.
Q. What are the most common problems in closing a home purchase?
A. Most sale contracts close without a hitch. But some do indeed encounter delaying problems, as was revealed in a recent survey of Realtors.
About 60 percent of Realtors reported some type of issue on their contract. For example, 12 percent of Realtors identified a financing issue; 8 percent had home inspection problems surface; 7 percent had an appraisal issue.
Three percent of Realtors also identified issues in buying/selling distressed property, tilting and deed issues, or with contingencies stated in the contract, it was reported by the National Association of Realtors.
"It is surprising that in a 'tight' and 'difficult' credit environment, only 12 percent of contracts that were reported to have settled or terminated had financing issues," economists wrote in the NAR report. "One explanation may be that potential homebuyers are deciding to sit on the sidelines for now, so these buyers were not captured in the data."
Q. Is home affordability still rising?
A. No, affordability is now down from a year ago as higher prices continue to outpace incomes, according to the National Association of Realtors.
Nationally, the median single-family home price is $221,000, up 10 percent from a year ago. The Midwest has seen some of the largest increases in home prices - climbing 11.6 percent in the past year alone.
• Email Jim Woodard at storyjim@aol.com.
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