REAL ESTATE TOPICS...Buying a home is getting easier — at least in one way

Average down payments on homes fall to three-year low

Buying a home has gotten a little bit easier — at least in terms of getting a down payment together — and young people may finally be ready to make a move.

The average down payment for single-family homes, condos and townhouses purchased in the first quarter of 2015 was 14.8% of the purchase price, down from 15.2% in the previous quarter and down from 15.5% a year ago, the lowest level since the first quarter of 2012, according to new data released by real estate data firm RealtyTrac. The average down payment for loans issued by the Federal Housing Authority — a government agency — originated in the first quarter was 2.9% of the purchase price while the average down payment for conventional loans was 18.4% of the purchase price.

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“Down payment trends in the first quarter indicate that first-time homebuyers are finally starting to come out of the woodwork, albeit gradually,” says Daren Blomquist, vice president at RealtyTrac. New low down payment loans recently introduced by Fannie Mae and Freddie Mac and lower insurance premiums for FHA loans are helping first-time homebuyers, who typically can’t afford large down payments. “Less competition from the large institutional investors that have been buying up starter home inventory as rentals is also helping to tilt the balance,” he adds.

However, the down payments are still higher than the median household income, which currently hovers at $54,578, according to Sentier Research, a group that tracks household income. The average down payment was $57,710 in the first quarter, down from $57,992 in the first quarter of 2014, RealtyTrac found. The average down payment for conventional loans backed by the government-backed lending enterprises Fannie Mae and Freddie Mac was $72,590, while the average down payment for Federal Housing Authority purchase loans that originated in the first quarter was $7,609 while

FHA loans usually have looser terms. The government has been promoting low down-payment loans to woo first-time buyers into the property market. The FHA has offered a 3.5% down-payment loan, and many can be below 3% due to down payment assistance programs. The government-backed lending enterprises Fannie Mae and Freddie Mac recently introduced the 3% down payment loan program, and the U.S. Department of Housing and Urban Development lowered insurance premiums that low down-payment borrowers have to pay, which Blomquist says would save the average house buyer $917 a year.

The share of low down payments — with a loan-to-value ratio of 97% or higher, meaning a down payment of 3% or lower — was 27% of all purchase loans in the first quarter of 2015, up from 26% a year ago, and they reached a two-year high. However, they often come with higher mortgage insurance, as they are considered higher risk, Blomquist says. FHA loans as a share of loan originations increased throughout the quarter, from 21% in January to 25% in March. (Low down payment loans accounted for 83% of FHA loans in the first quarter versus 11% of conventional loans.)

Now all buyers have to do is find a house.