Tags: fannie | freddie | homebuyers | Banks | Bigger | Down | Payment

Banks to Homebuyers: Bigger Down Payment, Please

Thursday, 17 Feb 2011 08:22 AM

Banks are requiring post-housing crisis homebuyers to put down more cash in down payments for mortgages, The Wall Street Journal reports.

The Obama administration has called for a minimum of 10 percent on conventional loans, defined as those that can be bought or guaranteed by mortgage giants Fannie Mae and Freddie Mac.

While some studies show that those who pay more up front for a home are less likely to default, others say making it harder to take out a mortgage will push home prices down even further.

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A Miami home for sale
"If there is a scenario where the government talks about raising down payments to 20 percent on conventional loans, you would absolutely crush the housing market," Peter Norden, chief executive of Real Estate Mortgage Network, an Edison, N.J., brokerage, tells the Wall Street Journal.

The median down payment in nine major U.S. cities rose to 22 percent in 2010 on properties purchased through conventional mortgages, according to real-estate tracker Zillow.com.

That percentage has doubled in three years.

The housing market, whose crash brought down the U.S. economy with it, is not looking too healthy these days, even as the overall economy recovers from the recession.

Housing, a key driver of the U.S. economic health due to the construction jobs it creates, won't get better until overall employment improves at a much quicker pace, experts say.

"We probably won't see a strong recovery in construction jobs anytime soon," Sal Guatieri, senior economist BMO Capital Markets, tells The Associated Press.

"Not a lot of people are showing up to builders' lots, not even to kick the tires. We just have to wait it out."

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Banks are requiring post-housing crisis homebuyers to put down more cash in down payments for mortgages, The Wall Street Journal reports. The Obama administration has called for a minimum of 10 percent on conventional loans, defined as those that can be bought or...
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Thursday, 17 Feb 2011 08:22 AM
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