The hurdle remains high.

Photographer: Tim Boyle/Getty Images

Want a House? Good Luck With the Down Payment

Jonathan Miller writes about the housing economy and other aspects of real estate. He began a real estate blog, the Matrix, in 2005, and has written a column for He is co-founder of Miller Samuel, a residential real estate appraisal company, and the commercial valuation firm Miller Cicero.
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Saving for a down payment has long been a big challenge for anyone who wants to buy a home. And it got harder after the financial crisis, as lenders insisted on down payments of 20 percent or more for conventional mortgages, which make up the bulk of the market.

That seems to be changing a bit -- perhaps because so many consumers have paid down other debt and have raised their credit scores. Since 2010, the average down payment has declined to 18.4 percent from 21.4 percent, according to data from Realtytrac. (Just by way of comparison, it was about 2 percent at the peak of the housing bubble.)

For a lender, there are certain drawbacks to loans with less than 20 percent down. For one, the loans sometime don’t qualify for a government guarantee or insurance. There also is a practical reason for the 20 percent standard: Historically, when a property went into default, banks could foreclose and then sell quickly at say a 20 percent discount, and still recoup their investment. Banks also see bigger down payments as a way to ensure that borrowers have more at stake, tamping down the speculation that contributed to the housing bubble.

For many buyers, however, the down payment hurdle remains a source of frustration, making it hard for many people to benefit from mortgage rates that have been at or near record lows for several years. 

Does the decline in down payments signify an easing of mortgage lending standards? If it does, it's only marginal and more likely signals that banks are just a bit more willing to lend to customers they consider lower overall risks, regardless of the down payment size.

Maybe when interest rates began to rise, and lenders see the potential to earn wider spreads, we will see mortgage-lending standards ease a bit. Until then, buyers need to keep saving their pennies.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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Jonathan J Miller at

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James Greiff at