The 0% Down Payment Is Officially Dead

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Tombstone_Tammra_McCauley_FlickrThe days of “Zero Percent Down” on a new home are officially over. A new report by finds that in nine major cities, banks increased median down payments to about 22% of the cost of the home in 2010.

That’s about four times higher than just a few years ago.

“The middle ground buyer is the one having to fight to get a conventional mortgage,” Zillow economist Stan Humphries told the Wall Street Journal, which originally covered the report. Zillow did not respond to a request for comment. “There’s no question that the tightening of criteria unquestionably prices households out of the market.”

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Banks are increasing the amounts they require in down payment to force homeowners to take on more of the risk and reduce buyers’ incentive to walk away from homes that may still decline in value, Zillow found. It’s a big turnaround from the housing boom, when banks encouraged buyers to place little or no money down in order to boost income from loan fees.

The average down payment level reached a record low 4% in the fourth quarter of 2006, according to Zillow. In some markets, including San Diego and Stockton, Calif., average down payments were actually $0 for many years. Both markets average just over 20%.

The highest down payments were in Los Angeles, where banks required a median down payment of 24%, Zillow found.

This month the Obama administration called for rules that would gradually raise the minimum down payment on loans bought or guaranteed by Fannie Mae or Freddie Mac to 10%.

Image: Tammra McCauley, via

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  • Kyle Weaver


    Not entirely true. There are several forms of NO DOWN PAYMENT alternatives for Buyers these days. Generally speaking, you are correct things have definitely become more conservative. Speaking for Missouri (which hold my License), we offer USDA and VA Loans along with down payment assistance programs where Borrowers can get financed @ 100% of the Home Purchase.

    Plus FHA allows for a Buyer’s parents, boss, or significant person to make the Down Payment for the Borrowers. I would be glad to speak to you or anyone interested in knowing how to make it happen with ZERO DOWN. Thank you for the article! Kyle D. Weaver, USA Mortgage, NMLS 235637, mobile 636-399-1692

  • Chris Maag

    Thanks for letting us know this, Kyle!

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