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What size down payment should be required for a mortgage?

The Obama administration called for gradually raising down payments to a minimum of 10% on conventional loans, meaning those that can be bought or guaranteed by mortgage giants Fannie Mae and Freddie Mac. And mortgage data show that private lenders are already pushing sharply higher the required down payments, mainly to mitigate their risk as home prices continue to fall.

Where do you think down payments should fall?  Should the equity be more substantial to prevent default? Or should entry barriers to homeownership be lower to help the housing market recover?

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    • 13 hours ago
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    This discussion is absurd. Raising down payment requirements now is like throwing a life preserver to a drowned man. What the housing market needs now is STIMULUS. For some reason, they've figured that out as far as the economy is concerned but not regarding the housing market. Underwriting standards need to be raised when values are rising NOT when they are falling! Two more things. 1. Fannie Mae allowed 95% financing back in the 80's, maybe even before that. FHA was completely self funded for decades while allowing 2.75% down. 2. This really gets my goat - If a PMI company is willing to insure loans to 95%, what right does the government have to not allow that? This government has gotten way out of hand. All they have accomplished with all the new regulations is to have completely eliminated consumer choice. It concerns me that so few people recognize this.

    4 Recommendations

      • 8 hours ago

      Stimulus should come from increased demand. REAL demand - no government-sponsored "incentives".

      If a bank is left to its own devices, it will require more equity from the borrower than 5% up front. The government should learn its lesson and stay out of the mortgage business. The bubble was the government's doing.

      Asking for a stimulus is asking for another bubble. I think that's the kind of growth we can all do without.

      8 Recommendations

    • 12 hours ago
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    Requiring a 20% cash down payment for conventional loans is the quickest and easiest way to prevent foreclosures. That's old school banking that works.

    15 Recommendations

    • 11 hours ago
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    It has to be an amount that is substantial enough to keep folks from walking away from the payments. However, one important thing to understand is that if the free market and private sector are willing to back mortgages with 5% down, go for it! The only ones doing that now are the federal government, which creates a false economy and a bubble housing market. Prices must come down further, and we must get the govt out of the housing market. If you included Fannie/Freddie impact, artificially low rates, mortgage/property tax deductions, and tax credits, you can see just how false the housing market truly is. The free market is no where to be found!!! Read more on why the housing market still needs to correct....

    http://bit.ly/eMLCa4

    3 Recommendations

    • 8 hours ago

    1. All mortgates are to be provided by purely private money.

    2. The private money provided must be untouchable for the same number of years as the mortgage term. I.e. - banks cannot use deposits to make loans (also i.e. - no fractional reserve banking permitted).

    3. The down payment, interest rate, and credit worthiness are dictated by the individual making the deposit.

    There is no "should" here. Mortgage down payments are all dictated by a risk-reward calculation determined by the individual risking his own capital for a return. The reason we're getting into this improper "should" discussion is that the current mortgage system improperly subsidizes decisions with other people's money. Eliminate the taxpayer support and fractional reserve banking protections, and that should be the end of the discussion. If I want to then loan someone $300,000 with no money down and low interest and then proceed to get burned, that's on me and me alone.

    2 Recommendations

    • 7 hours ago

    I would offer this, a lending institution can loan any amount (load to value) they want.
    However, they own that loan 100% until the loan to value drops to 80% (or lower). They cannot sell that mortgage until the loan is paid down to at or below 80%.

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