A recent article in the Los Angeles Times reported the traditional 20% mortgage down payment is a thing of the past even though it remains a benchmark quoted by lenders and mortgage experts.
According to the Times: The typical down payment for 60% of first-time home buyers is 6% or less, according to National Association of Realtor’s latest data. But the association’s research finds few adults ages 34 and younger (just 13%) realize they can buy a house with a down payment of 5% or less.
The experience of local realtors varies greatly from the national average and from client to client and transaction to transaction.
“I actually have a buyer in escrow right now who is using a 5% down loan, and two others in escrow that are purchasing with cash,” Chase Campen, with the Beverly Hills office of Compass told the Buzz.
“It is true that recently lenders have opened up many programs where you can get in for less than 20% down, and many buyers – particularly first time homebuyers – are taking advantage of this,” added Campen. “Interest rates remain historically low, which makes borrowed money more affordable. People are trying to take advantage of that.”
John Duerler of Hancock Homes Realty on Larchmont noted that many of his clients are outside the conventional loan market because our local real estate is valued much higher than the national average making it hard for first-time home buyers to get a foothold here unless it’s a one bedroom condo.
Duerler told the Buzz he has clients make down payments of 30% or more especially if they are getting help from their boomer parents.
“People in the $1.8 million range have more money and they are putting it in homes using more cash down to sweeten the deals when there is competition,” said Duerler.
“Los Angeles is on pace to see many more cash purchases in 2017, than 2016,” said Campen. “The bottom line is that our real estate market is so hot, people are finding ways to purchase with all kinds of financing options, and no financing at all.”