Real Estate News for North Pinellas County

Archive for the 'down payments' Category

Rates down, but down payments up for Pinellas County real estate (and real estate everywhere)

I’ve mentioned here a number of times how low mortgage interest rates are, and how they – along with the lowest home prices in at least a decade – make homes really affordable right now.

But to be fair, there is another side of the coin (isn’t there always?) which makes home-buying more of a challenge than it was in the rock-n-roll days.

down paymentI’m talking about down payments.

Home prices may be down, and interest rates may be at historic (or near-historic) levels, but the demand for more substantial down payments is up. It’s all part of the tougher underwriting standards; lenders want to see buyers begin the home buying process with a bigger personal stake in the transaction, and that means larger down payments.

Just a few years ago, it seemed like down payments were going to become a thing of the past. Nothing-down and little-down mortgages were all the rage, and you could buy expensive homes and finance them with big mortgages without having to come up with actual cash – or not much of it, anyway.

Great interest rates are available now, as I’ve written about in the past. But if you really want that rock-bottom rate, you’d better be ready to come up with a 20 percent down payment.  It’s still possible to get a mortgage and put less than 20 percent down, but the rates are going to be higher.

LendingTree came out with a report last week that listed state-by-state average down payments, and the average of all of them was 12.29 percent.

lendingtree(I know you’re wondering what the average rate is for Pinellas County real estate. Actually, LendingTree didn’t get that fine on rates, but the company DID say what the average down payment is for the state of Florida: 13.16 percent.)

Fannie Mae and Freddie Mac want at least 10 per cent down.  If you want the very best rate, you’re going to have to also pay for private mortgage insurance – not part of the down payment, but an upfront cost you can’t avoid.

A Lending Tree spokesperson said, “The reality is when you put less than 20 percent down, you have to pay for some kind of insurance to protect the lender from the higher risk that you’ll default…but private mortgage insurers these days aren’t always willing to do business with low down payments.”

There is some speculation out there that if we are going to continue to have record low interest rates, the mortgage industry may increasingly move toward that 20 per cent down payments.

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