With steep competition, some buyers are scrambling to come up with larger down payments to gain a competitive edge.
“In many purchase situations, there are multiple offers, and the buyers who have the bigger down payment are more likely to win out,” Daren Blomquist, ATTOM Data Solutions’ senior vice president, told The Wall Street Journal.
The median down payment for home purchases that were financed in the third quarter of 2017 soared to a high of $20,000, or 7.6 percent of the median sales price of $263,000, according to ATTOM, a real estate data firm. That is up from 6.1 percent in the third quarter of 2016.
On luxury homes, buyers are bringing even more money to closing. In the third quarter of 2017, the median down payment on a financed home purchase over $1 million was $385,500, or 28.2 percent of the median sales price.
“If you want to play in the high-end market, you have to be able to pony up a bigger down payment,” Blomquist told The Wall Street Journal.
Not all jumbo-mortgage lenders require large down payments, however. For example, BBMC Mortgage in Chicago allows qualified borrowers to put down as little as 5 percent on a jumbo mortgage up to $650,000. For loans up to $1 million, the lender has programs available that allow 10 percent down.
Mortgage rates are expected to increase in 2018 and that will impact how much buyers can afford. Lawrence Yun, chief economist at the National Association of REALTORS®, predicts the 30-year fixed-rate mortgage rate will rise to 4.5 percent by the fourth quarter of 2018—and to 4.8 percent by the end of 2019.