Tuesday, January 6, 2009

Realtors to Media: Get Your Down-Payment Facts Straight

A good article that cuts to the chase on today's lending standards. Note that first time homebuyers also have incentives, based on their income.

January 05, 2009 10:39 AM ET | Luke Mullins

As banks jack up their lending standards in the face of higher delinquencies, there have been numerous stories in the press about what borrowers need to put down these days in order to get a mortgage. But according to the National Association of Realtors, some journalists are getting the facts wrong.

In an attempt to correct what it considers 'misinformation in the media,' NAR recently issued the following release:

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.

The facts:

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.

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