For a lender, down payments represent “skin in the game” since the more money a borrower can put toward a house the more the buyer will lose if they stop making payments. For many borrowers, attempting to put as little down toward the purchase of a house is standard, as they would rather have more money left over for furnishings, landscaping, and so on.
FHA (Federal Housing Administration) loans, which due to the government insurance, require very low down payments, and they rose to a very large share of the market during the worst years of the housing crash. Fannie Mae and Freddie Mac require at least 10% down, but borrowers must pay private mortgage insurance unless they put more than 20% down. In addition, private mortgage insurers these days aren't always willing to do business with low down payments.
But how much should borrowers put down? It depends on the program, but that certainly the days of “No money down!” are gone. Before the mortgage crisis unfolded, it was quite common for homeowners to come up with 20% of the sales price for down payment. So prospective homeowners took their time, saved up money in the bank, and when the time was right, made a bid on a property. We are back to those days, although some programs, such as FHA, VA, USDA Rural Housing, and Fannie Mae’s Homepath programs allow for lower down payments.
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