The 20% mortgage down payment is all but dead

For first-time home buyers, the challenge of coming up with a 20% mortgage down payment is often difficult enough to keep them out of the market. But the fact is, the 20% down payment is all but dead — and has been for quite some time, especially for first-time buyers.

“It’s been my experience that about half of my clients know that there are loans and/or programs that require less than 20% down,” says Kris Lindahl, a real estate agent in Blaine, Minn. “The other half still think that they must have at least 20% down in order to qualify for a home mortgage.”

But most people don’t put 20% down on a home, even though it’s the benchmark most often quoted by lenders and mortgage experts. More than 70% of noncash, first-time home buyers — and 54% of all buyers — made down payments of less than 20% over at least the last five years, according to the National Assn. of Realtors.

Fannie Mae and Cal State Fullerton researched what U.S. households know about qualifying for a mortgage and came to this conclusion:

“Correcting consumer misconceptions may be a more efficient approach to expanding homeownership opportunities by encouraging households who may already be qualified to own homes.”

Not sure this is new. The first house I bought on my own, without partners was with 10% down…Low down loans have around for over 50 years…

Earlier the better no matter how much down payment.

The very first home I bought was with 25% down, in 2004/5 period and it was above 1M. I was able to put down 25% I was saving 10 years and reluctant to buy home at bay area for those 10 years.

I would have saved a lot, at least 250k, had I put down 10% ahead and bought it earlier !!

As I am writing this message sitting at my relative home (Los Angeles) which he bought with FHA loan at 4.625% rate as first time buy in 2011, now doubled in value, he refinanced 30 year fixed at 3.5% few months before with good cash out !


[quote=“Jil, post:4, topic:2623”]
4.625% rate as first time buy in 2011, now doubled in value, he refinanced 30 year fixed at 3.5% few months before with good cash out !
[/quote]Did he know his property mortgage is no longer non recourse?

[quote=“hanera, post:5, topic:2623, full:true”]

All the cash outs are used to pay off rest of his debts including 2 car loans balance.

Even after cash out refinance, he pays $2100/month rent equivalent for 4 BD 2 BH, Pays lower property tax and has no loans except this mortgage. The current rent for similar homes is around $3000/month range.

I do not think he is aware of recourse/non recourse implications, it does not matter as he is not planning to move out. There won’t be any situation to file bankruptcy or any kind as he can easily manage the payments, the DTI is less than 25% of his income.

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I think cash out refinance is still non-recourse to the extent of the original loan (i.e. Not the cash out portion)

I’ve talked to several wannabe buyers, and most have $30K to $60K ready to put as a down payment. I tell them that maybe they can do it with FHA but as it has been the mood, they will be a loser proposition against people with lots of $ for down payment.

Housing boom still has legs. Many buyers will use the low downpayment option. Also banks will relax underwriting with an ever rising price. Until after the peak

Anyone use SoFi? They promise a super fast closing which is important in a competitive market. Also, they’ll allow 90% LTV with competitive rates.

The rates SoFi quoted me 3 years ago was higher than other banks. They were also pretty slow in the sense that it’s hard to get to the person handling my case. Versus the traditional mortgage bankers who are eager to get business and will answer your call on weekends. With SoFi it’s just people working 8 to 5, who will get the same amount of pay whether she gets your business or not.

Maybe things have changed recently? But I am pretty dubious of all these so-called disrupters.

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That’s really disappointing. At one point, they promised 14-day closing which would be a reason to use them.

Some of the local brokers can do 15 days if you went through under-writing and loan amount is <635K. If not, 21 days.

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To give SoFi benefit of the doubt, 3 years ago when I tried them out they just started the mortgage business. I wouldn’t be surprised if they tighten up the operation since.

In my recent purchase, WFB closed in 21 days and got preliminary approval from the under-writer in 5 days. they were ready to fund sooner but got held up by insurance underwriting. However, i don’t know if this can be generalized as it’s not my first or only mortgage with them

IIRC, it is for multiplex investment property with high cash down. What is the LTV for which they closed 21 days?

40% down. They require 40% down for investment properties

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Someone says that with 5+ units, you can get loans at 3.5%. That’s better than 2-4 units. Is commercial mortgage a better deal than agency mortgage?