Some banks requiring bigger down payments
Feb 2011 17

The Wall Street Journal is reporting that many banks are looking for home mortgage loan borrowers to put more money up as down payments, in order to reduce the risks of the new homeowners defaulting.

The median down payment in nine major U.S. cities rose to 22% last year on properties purchased through conventional mortgages, according to an analysis for The Wall Street Journal by real-estate portal That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.

The logic is, you’re less-likely to simply walk away if you have a lot of your own money at risk. And, if you do need to sell, you have a lot of “skin in the game” so you can lower your price and still sell without having to write a check to your bank.

There are still other ways to buy a home with less than 20 percent down. Federal Housing Administration loans require as little as 3.5% down. Veterans can sometimes qualify for loans with zero percent down. And, your local bank might have programs, too.

While the higher minimums are an additional hurdle for homebuyers to straddle, do not let this dissuade you from at least talking to your lender about your options.

Hopefully, these stringent lending guidelines will have the intended effect of reducing or eliminating future housing busts.

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