| By :
Nick Messe
In the last several years, surging home foreclosures, coupled with the most severe economic crises to hit the world since the Great Depression seventy years ago, have changed the landscape of the home buying market, probably permanently. Still now that home prices have dropped so precipitously since 2007, many consumers may find themselves beginning to consider buying a home again. With money scarce and a near record number of individuals unemployed, it is not quite as easy to save large amounts of money for down payments. Those who have the money on hand may be afraid to put it down on the table and tie it up in a home purchase. Given the devastating economic climate of the past couple of years, these are entirely understandable and reasonable concerns. Those contemplating buying a home now will likely be wondering what would be the smallest down payment that they can commit to such a purchase. As a result of the myriad of foreclosures that have wracked the mortgage business since 2007 especially, Congress has reworked the laws on down payments for home purchases. They recently passed a new statute, HR 3221, to address these issues. As a result of these newer requirements which took effect January 1, 2009, prospective home buyers are now forced to put down a bare minimum payment of at least three and a half percent for conforming loans or jumbo home loans. If the loan does not qualify as a first time home buyer loan, or is a non-FHA loan, then the down payment requirements are typically increased by ten to twenty percent over these previously stated amounts. This means that a first time home buyer would have to hand over an $8,750 down payment, not to mention closing costs and agency fees, on a $250,000 priced house. However, if this were a non-FHA loan, the down payment would go up to between $9,625 and $10,500, Of course we should not forget to factor in those closing costs as well. These are not small amounts of money in the economy of today. Such increased down payments have been made necessary by the number of home owners choosing to simply walk away from homes that they have practically no vested interest in, financially. Congress has figured that people who have put about $10,000 or more of their own real money into a property will think twice before defaulting to the banks. This of course leads the home buyer to a question that he or she may not have yet considered. Is it ever a good idea to put down the smallest down payment allowed? Some of you are no doubt taking a deep breath at the mention of this, but this is a valid and important question. The answer lies in several important considerations, all of which a reputable lender can help you to think about. What is your current financial position? Will coming up with a larger down payment, that reduces your monthly payments and total loan interest amounts, set you back financially? Do you have any fears concerning the long term stability of your present job? If the answer to either of these questions is an unqualified yes, then you should probably put down as little as is required. On the other hand if you are among the fortunate few with extra money in the bank, and a stable and reliable job, with hopes for raises and promotions, then it is never a bad idea to put more down. In the long run, you will almost certainly be glad that you did.
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