Banks push home buyers to put down more cash

Many economists and housing analysts blame lax lending standards – including no-down payment, no-document loans – for contributing to the challenges in the current real estate cycle.  As a result, most lending institutions have increased minimum down payment requirements.

Now, a new proposal by the Obama administration calls for gradually raising down payments to a minimum of 10 percent on conventional loans – those that can be bought or guaranteed by Fannie Mae and Freddie Mac.

• Banks have found that larger down payments discourage delinquencies by increasing the buyers’ exposure to loss and reducing the impact of declining prices.  According to a study by the Federal Reserve Bank of St. Louis, buyers who made smaller down payments were more likely to default during unfavorable economic circumstances, such as a housing market slowdown or job loss.
• A recent analysis showed the median down payment in nine major U.S. cities rose to 22 percent last year on properties purchased with conventional mortgages.  That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.
• Higher borrowing costs and larger down payments could cause housing prices to decline further.  For now, borrowers who can’t afford such amounts are turning to alternative programs, such as loans for veterans or those backed by the Federal Housing Administration.  Some industry experts say this has created a nonconventional mortgage market for riskier borrowers and those who don’t qualify for conventional loans.

I just heard this week about a company looking to take advantage of this situation. It’s called Lenderline who claim to be offering “no income documentation loans”.  I say be wary, but if you want more info you can call me at 831-236-4513.

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Gorgeous, turnkey home in Old Monterey.  Set on a hill to provide privacy from neighbors sits this completely remodeled home w/ Bamboo flooring & gourmet kitchen w/limestone counters & stainless appliances. The master suite is huge w/ tree top views & tons of windows for light. The tiered back yard has great patio, lush gardens & secluded hot tub. Not a thing needs to be done, truly move-in ready!  SqFt: 2,026 Lot Size: 5,100 Sqft

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Not a REO or Short Sale - ready to sell NOW!  Beautifully upgraded home in Sunny Seaside Highlands. Kitchen has upgraded cabinets, tile floors, granite countertops & stainless steel appliances.  Newly painted interior. Level and fully fenced backyard backs up to lovely greenbelt.  SqFt: 2,593 Lot Size: 4,789 Sqft

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© Patty Ross,  KRXA Radio Show #195  February 25, 2011