Fewer Borrowers Relying on High LTV Loans

Just as the government sponsored enterprises Fannie Mae and Freddie Mac are launching new 97 percent conventional loans, RealtyTrac is announcing that demand for such low downpayment loans has never been...lower. A recently completed study by the company looked at 20 million purchase mortgages for single family homes and condos originated between 2004 and 2014 and found the share of buyers putting down 3 percent or less hit its lowest point in 2014.

Of course this may not be a factor of demand, RealtyTrac did not venture into that area.  More likely it is the result of stricter underwriting standards, perhaps for private mortgage insurance as well as the loans themselves.  Nonetheless, 25 percent of buyers taking either conventional or FHA loans in 2014 put down less than 3 percent for a home purchase compared to 27 percent in 2013.

Low downpayments hit a peak during the period in 2009 when the homebuyer tax credit motivated purchases among first-time homebuyers, the ones most likely to put the minimum down. The share has dropped every year since them. Low down payments had a 37 percent share of sales in 2006, the peak of the housing bubble.

The weighted average down payment did not change much over the study's ten years, wavering between around 13 and 16 percent.  In that atypical tax credit year of 2009 the average down payment was at a low of 12.9 percent and it hit a high of 15.6 percent in 2013.  Last year the average was 15.4 percent.  The un-weighted average dollar amount of the downpayment reached a high of $58,900 in 2013, based on an average purchase price of $291,428.  

RealtyTrac found a strong correlation between the percentage put down on a purchase and the price of the home.   For purchases where there was no down payment (the combined loan amount was actually more than the purchase price, typically indicating a down payment assistance program or purchase-rehab loan was involved) the average sales price was $154,214, while for purchases with a down payment of less than 3 percent but more than 0 percent, the average sales price was $190,304.  For every percent the down payment increased the average purchase price also rose, an exception being between the 10 to 15 percent and 15 to 20 percent ranges. On the other end of the spectrum, the average purchase price in 2014 was $502,213 for purchases when the borrower put down 50 percent or more.