The average national down payment percentages are decreasing as the housing market improves, according to a recent report by LendingTree.
The organization, headquartered in Charlotte, N.C., ranked each state by the average down payment percentages offered to its customers as of May 31. According to the report released June 3, the national average for a down payment percentage for a 30-year fixed rate conventional loan is 16.1 percent, a decrease of 9.4 percent in the past two years.
Washington was ranked 41st with an average down payment of 16.5 percent for a 30-year, fixed-rate conventional loan. The average down payment in the Puget Sound area on conventional purchase loans remains fairly stable, with even a slight increase year over year given the competitive market, said Les Bedford, senior vice president of home lending for the Puget Sound area at Umpqua Bank.
“However, as the employment picture continues to stabilize, or at least becomes less uncertain, I do expect this to change as borrowers seeking to take advantage of lower down payment loans continue to enter and re-enter the marketplace,” he said.
Umpqua Bank as a whole had $2 billion in residential housing loans last year. Of that, $265 million was in the Puget Sound area and the bank is expecting to increase that to about $400 million in the region this year.
“We are seeing a trend toward FHA (Federal Housing Administration), VA (Veterans Affairs) and USDA (U.S. Department of Agriculture) loans and we have strong expertise in that area,” Bedford said. “Specifically, in Puget Sound, we’ve seen conventional loans go from 81 percent of our production six months ago to 77 percent in May of this year.”
Mississippi was ranked as the top state with a lowest average down payment percentage of 11.9 percent, followed by West Virginia, Alabama, Kansas and Missouri. The final five states on the list with the highest average down payment percentages include Hawaii, Massachusetts, California and New Jersey in the last spot, with a rate of 20.5 percent.
The down payment percentage in Washington may be higher than the average in 40 other states due to a healthier economy, said Dave Gardner, a mortgage adviser with Mortgage Advisory Group in Everett.
“The Puget Sound as a whole is not as economically challenged as the rest of the country,” he said. “People here tend to have better income and better savings and are able to put down more.”
Those who can afford to are likely to pay a larger down payment instead of paying for private mortgage insurance, he added.
Today’s borrowers should have a credit score of 640 or better, a stable income, have a down payment and get prequalified to secure a home loan, Gardner said.
“At the end of day, people who buy homes are still going to have to pay the monthly payments,” he said. “The underwriting standards are strict but real people can get a loan.”