The wake of the housing sector decline still echoes on a national level. Banks and institutional lenders have been hesitant to ease up on their mortgage lending practices, as leniency and negligence played a large role in the recent bubble crisis. However, as the housing sector continues on the path to recovery, lenders appear willing to take more of a risk on prospective borrowers. According to Credit.com, mortgage lenders are reportedly accepting lower down payments. As such, more prospective buyers will be able to actively participate in the market.
According to a report by LendingTree, the third quarter of 2013 saw the average down payment for a 30-year fixed rate mortgage decrease 2.74 percent from the previous quarter. As the recovery gains traction, institutional lenders have begun accepting down payments as low as 15.73 percent of a home’s value. While not confirmed, their willingness to accept a lower down payment may be attributed to lender confidence. More specifically, borrowers are less likely to default on their mortgage with home values continuing to rise.
“Lenders are putting more focus on purchase mortgages and are adjusting minimum requirements to attract borrowers,” said Doug Lebda, LendingTree founder and CEO. “With home values improving, the risk of borrowers defaulting on loans has decreased, giving lenders more confidence to lend with less cash down from qualified borrowers.”
While lenders appear set to take more risks, down payment percentages still remain high in regions with rapidly appreciating home values. Certain states, in particular, have retained their high down payment rates. The following states represent the areas with the highest down payments:
- New Jersey (18.8%)
- California (18.6)
- New York (18%)
- District of Columbia (17.9%)
- Massachusetts (17.5%)
According to the U.S. Census Bureau, these states are also representative of the highest home values.
As a drastic comparison, those states with the lowest down payment percentages are as follows:
- Nebraska (12.5%)
- South Dakota (12.8%)
- Arkansas (12.9%)
- Alabama (12.9%)
- Missouri (13.1%)