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Could you cough up 20 percent down? Should you?

Posted by Scott Van Voorhis December 9, 2011 05:55 AM

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Some fear that demanding 20 percent down would be a major shock to a housing market still struggling to get up off its knees.

It is certainly the big question amid a raging debate in Washington on whether to return to the 20 percent down rule, the long-time gold standard in real estate that was thrown to the winds during the bubble years.

Yet a new survey of what home buyers are putting down reveals we are already more than halfway there.

Amid the now years-long housing downturn, the down payment has morphed from a small or token entry feet to a substantial, upfront payment.

Nationally, banks and other lenders across the country are now asking for, on average, 12.29 percent down, according to a new report out by LendingTree.com.

Here in Massachusetts, the average is a shade below 13 percent, making us No. 10 in the country for states with the highest down payments.

New Jersey is tops, with an average downpayment of 13.76 percent.

Other states with similarly high home prices are also at the top when it comes to hefty down payments, with Washington D.C., New York, Hawaii, and California, all above 13 percent.

States with the lowest average downpayments - generally in the 11 percent range - include Wyoming, Utah, Oklahoma and Tennessee.

LendingTree is clearly hoping to stir up concern about efforts to make 20 percent down the new gold standard of the housing market. After all, it would mean another big cut in business.

"If federal regulators were to adopt the proposed 20 percent down payment requirement, a majority of borrowers wouldn't be able to meet the standard given the findings in this report," said Doug Lebda, founder and CEO of LendingTree, in a press statement.

But you can look at the same data and come to the exact opposite conclusion - as I have.

My wife and I bought our Natick fixer-upper for $280,000 in 2002, with just $10,000 down.

Should we have been forced to fork over more money up front? Yes, because everyone else would have faced the same hurdle. And that would have likely meant lower prices and no real estate bubble, which, after all, was built on easy credit and low barriers to entry.

In that alternate universe, we probably could have bought our fixer-upper, say, for $180,000, not $280,000.

The real estate world has already changed dramatically, and while some of the changes, like higher down payments, have been painful, they are needed.

We've already made the jump from a market where 3 percent down was the norm to where homeowners now are expected to kick in three or four times that amount.

So what about that jump from 12 to 20 percent? Piece of cake.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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