Fewer first-time homebuyers are finding a way to buy a house with a relatively low down payment as their options shrink and lenders’ down payment requirements rise.

From April through June 2014, about 67 percent of first-time buyers made a downpayment of 6 percent or less, down from 74 percent in 2009, according to the latest Realtor Confidence Index report from the National Association of Realtors.

One reason the average down payment is growing may be that more and more first-timers are choosing conventional over FHA financing, which requires only 3.5 percent down. Underwriting standards have been getting tighter (see More Loans Close Despite Tight Standards) and borrowers’ costs are going up. Tight underwriting standards are especially challenging for first-time buyers, who generally need mortgage financing with low downpayment terms, who may be paying off student debt, and who may have credit scores that are not top-notch . Cumulative increases in FHA insurance premiums over the past two years that translates to about $100 a month in additional out-of-pocket costs for borrowers also is also discouraging buyers from using FHA financing, according to Realtors participating in the survey. (For more on FHA’s cost increases, see First-time Buyers to Pay for FHA’s Cost Increases).

 

 

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http://www.realestateeconomywatch.com/2014/07/down-payments-go-up-for-first-time-buyers/