New Report Finds Buyers Paying Smaller Down Payment
A new report has found that Southern Nevadans are making smaller down payments on new homes. This could be a sign of a lessening of the stringent requirements on mortgage lending, which has kept so many out of the housing market since the housing crisis. The report found that the average down payment on homes during the first quarter of 2015 was 13.3 percent, compared to 14.9 percent just a year earlier. This could be largely due to the low down payment program offered by lenders Fannie Mae and Freddie Mac.
Lower Down Payments Helping Increase Home Sales?
The Federal Housing Administration made changes in the Fannie Mae and Freddie Mac programs that took effect at the end of January 2015 and this is thought to be a huge propellant to the housing market and lower down payments. This helps those first-time buyers who are not able to come up with the larger (20% or more) down payments that were previously needed to get into a new home. This is a good sign as far as the health of the housing market, as increasing sales and getting some of the surplus homes off of the market are moves in a positive direction.
Some think that stronger credit scores could be a reason for the change in the down payment percentage. However, in Las Vegas and Southern Nevada, this is most likely not the case, as the residents are known for having the worst financial records in the country and the lowest credit scores. With the record of bankruptcies, foreclosures, underemployment, delinquent accounts, and uninsured residents, Clark County has an overall economic health that ranks 48th in the United States.
With our residents ranking high in the percentage of residents who spend more than they make and who borrow from non-bank lenders, this is a big sign that the lower down payments, especially in our area, are due to the changes in regulations, rather than the increase in credit scores that some professionals believe it can be attributed to.
Either way, it is certain to be good news for the housing market that the down payments are coming down. This will get more buyers into the market and allow the market to gradually get stronger. This can mean a trend that could continue to make the housing market more open to everyone who wants to buy, rather than those who are more affluent.