The National Association of REALTORS® put out an advisory to the media on December 31, 2008 regarding the facts about how much of a down payment a home buyer needs in the current market. The following is the release to the media.
There is some misinformation in the media lately about the required size of a down payment for a mortgage in today’s market, and the blog world is abuzz with misperceptions. Not all so-called experts are knowledgeable in this area, and some experts are being misunderstood.
1. An individual may be required to put down 20 percent based on that person’s financial situation. But that is not an across-the-board requirement for all borrowers.
2. A borrower who puts down less than 20 percent is required to obtain mortgage insurance.
3. Even in a declining market, a borrower is required to make at least a 5 or 10 percent down payment.
4. FHA requires a 3.5 percent down payment by borrowers, so long as they meet a 31 percent housing cost-to-income ratio. In other words, anyone who stays within their budget and who can afford a 3.5 percent down payment (even with family help) can become a homeowner.
PLEASE NOTE: FHA market share has grown roughly tenfold in the past year to an estimated 30 percent of new mortgage originations.