Freddie Mac: Prospective home buyers overestimate required down payment

by Ryan Smith16 Jun 2014
Prospective home buyers consistently overestimate the size of the down payment they’ll need to finance a home, according to Freddie Mac.

Citing a recent study by Zelman & Associates, Freddie Mac Vice President of Single Family Sales and Relationship Management Christina Boyle said most home buyers believe they’ll need equity of 11 to 15 percent.

“It's a wakeup call to the housing industry that we have more to do to let the next generation know they can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets),” Boyle wrote in a blog on the Freddie Mac website.

According to Boyle, 39% of those surveyed estimated that the minimum down payment requirement would be at least 15% of the purchase price.

“This includes large percentages of people who should be in their prime homebuying years,” Boyle wrote. “Specifically, 38 percent of 25-29 year olds and 42 percent of 30-34 year olds said lenders demand minimum down payments of 15 percent.”

That could mean that 60-72% of the “first-time home buyer” demographic may not realize they could get a conventional mortgage with a low down payment, Boyle wrote.

“Letting more consumers know how down payments are determined could bring more qualified borrowers off the sidelines,” Boyle wrote. “Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 or 10 percent.”
 

COMMENTS

  • by M Hipp | 6/16/2014 11:29:48 AM

    This is ALL due to our lovely media outlets who are constantly stating that "the banks still are not lending for mortgages" BALONEY!!! We have NEVER stopped lending on mortgages with anywhere from 0 to 5% down minimums depending on the mortgage programs. We need our Mortgage Associations to get off their duffs and do MORE with public notices and press releases to the media. CNBC is one of the WORST since they are so financially driven....but where are they located? NEW YORK CITY!!!! All they do there are JUMBO mortgages with the majority of the country does not need. Yes, Jumbos have more down and may be harder to find....but even then, there are still plenty of available outlets (unless you are buying a 32 million dollar mansion!!!) Let's get the media to STOP this nonsense. What say you all???

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