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Stuck with a high down payment?

Posted by Scott Van Voorhis June 4, 2013 07:13 AM

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If you are struggling to come up with tens of thousands of dollars down in order to buy a house, you are not alone.

Down-payment requirements are easing across the country, but they are still hefty here in Massachusetts.

When it comes to down payments, our state has the fourth highest average. If you want to get into a home here in the Bay State, you will likely have fork over more than 18 percent up front, according to a new LendingTree survey.

Only New Jersey, at 20 percent down, and New York and California, at just over 19 percent, has higher average down payment requirements.

There has got to be some sick joke here - after all, these are also all the states with the highest real estate prices. And, for that matter, the lowest foreclosure rates. Yet not only does it cost more to buy a house in Massachusetts and other high-priced Northeast markets, but it costs more up front. Much more.

In fact, our high down payments buck the national trend, with average up front payments having dropped more than 9 percent over the past two years across the country, LendingTree finds.

States with relatively low home prices also boast relatively low average down payments, with Mississippi home buyers having to fork over 11.9 percent to seal the deal. West Virginia weighs in at an even 12 percent, Alabama at 12.4 percent and Kansas at 12.7 percent.

LendingTree attributes the drop in down payment requirements to an improving housing market and economy, but I am not so sure that's the reason for it.

"As the housing market begins to improve, lenders are beginning to loosen their guidelines to more normalized standards and approve loans with lower down payments," said Doug Lebda, LendingTree founder and chief, executive, in a press release sent out by the company. "Although a good credit score is still important to have, borrowers may have an easier time qualifying for loans after years of tight guidelines, especially as home prices rise and we see fewer homeowners underwater."

Instead, banks are charging what the market can bear - median incomes are far higher in Massachusetts and New York than they are in Alabama or West Virginia.

Foreclosures accounted for just 6 percent of all sales in Massachusetts during the first quarter, compared to more than 18 percent in Alabama, Realtytrac reports.

Banks are requiring 18, 19 and 20 percent down in Massachusetts and other affluent states because they can. If 20 percent down were the norm in Alabama or West Virginia, home sales would probably crater there.

Are you ready to fork over 20 percent down? What did you have to pay up front to get into your home?

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

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

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