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Will 20% Soon Be the Minimum Down Payment on a Home?


Increased CostSeveral government agencies are reviewing data to determine what will be the minimum down payment required under the new Qualified Residential Mortgage (QRM) guidelines scheduled to be revealed in the next few months. In the original Mortgage Market Note issued by the FHFA, it was suggested that loan-to-value (the percentage of the overall purchase price which was being borrowed) was a major factor in determining if a loan would default:

“For most origination years, requirements for borrower credit score and loan-to-value ratio are the factors that most reduce the ever-90-day delinquency rate of mortgages acquired by the Enterprises that would have met the proposed QRM standards.”

The note then made the following proposal:

“An LTV ratio qualified residential mortgage must meet a minimum LTV ratio that varies according to the purpose for which the mortgage was originated. For home purchase mortgages, rate and term refinances, and cash-out refinances, the LTV ratios are 80, 75, and 70 percent, respectively.”

Basically, the original note suggested that a 20% down payment should be the new guideline. We realize that there has been much debate on this issue since and that the minimum down payment required under the new QRM guidelines will probably be less than 20%. However, we can’t know for sure.

Bloomberg reported last week:

“The six regulators drafting the separate QRM rule, including the Department of Housing and Urban Development, the Office of the Comptroller of the Currency and the Securities and Exchange Commission, must decide whether to include such a requirement -- and whether to make it less than the 20 percent they originally proposed.”

Will it be more difficult to qualify for a mortgage after the new QRM rules are announced? Probably

As David Stevens, President of the Mortgage Bankers Association said during a speech in Washington on Jan. 16:

“I have consistently warned of the regulatory tidal wave to come and it’s finally upon us. These changes will impact business operations and the future of mortgage access for years to come.”

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3 Responses to “Will 20% Soon Be the Minimum Down Payment on a Home?”

  1. Pete Sambets, Realtor January 23, 2013 at 2:17 pm # Reply

    Down payment and Credit Score. My opinion that these two items may slow down the housing recovery. Seems we have gone from one extreme to the other and the mortgage industry continues to take the brunt of the blame for the 2008 economic crash!

  2. Tri City Home Team January 23, 2013 at 5:58 pm # Reply

    And those who are sitting on the fence trying to decide if they should wait a while to sell their home? How huge a chunk of potential buyers will be gone if the buyers have to come up with 20% instead of the FHA current 3.5%...

  3. AngelTeam February 8, 2013 at 11:06 am # Reply

    Both comments below are valid and so true. While trying to protect the consumer they are at the same time punishing them and stalling a housing recovery!

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