NEW YORK (MainStreet)Down payment percentages for 30-year fixed rate mortgages are declining just as home prices and mortgage rates are rising, according to a new study.
"The study indicates that more people can buy homes now that down payment percentages are dropping because not everybody could afford to put down a 15% or 20% down payment," said LendingTree Founder and CEO Doug Lebda.
The LendingTree report reveals that average down payments have dropped 9.4% since May 2011 with New Jersey, California, New York, Massachusetts and Hawaii rating among the states with the highest average down payment percentages.
"Affluent homeowners have more money for a down payment," Lebda said. "You have higher incomes in New Jersey, California, New York, Massachusetts and Hawaii. They are all top 20 in terms of income in the U.S. That's one key factor and second is that home prices are higher in those states."
In 2013, the average down payment is $42,558 compared to $43,965 a year ago.
"Home prices are going up, because historically they've been very low--we're coming off a bottom," said Lebda. "While home prices are increasing, we are still far below the high."
A year ago, the national average for the price of a home was $257,650. Today the price tag is $264,329, according to LendingTree data.
States with the lowest average down payment percentage for a 30-year fixed rate conventional loan include Mississippi, West Virginia, Alabama and Kansas.
"Lenders have been very afraid of loan buy backs," Lebda said. "They are now loosening their underwriting guidelines overall but particularly in areas where home prices are rising."
Meanwhile, mortgage rates increased for a fourth consecutive week with the benchmark 30-year fixed mortgage rate rising to 3.99%, according to Bankrate.com's weekly national survey.
The average 15-year fixed mortgage climbed to 3.21%, and the same was true for the larger jumbo 30-year fixed mortgage rate which jumped to 4.20%. Adjustable rate mortgages were also higher with the popular five-year ARM notching higher to 2.81% and the 1-year ARM leaping to 3.04%, respectively.
"Mortgage rates move in tandem with the ten-year treasury rates," said Lebda. "Federal Reserve Chief Ben Bernanke said the quantitative easing program could end, which caused yields to increase on bonds, and there was positive economic data that would indicate the economy is improving and because of that yields went up on bonds dramatically."
Quantitative easing (QE) is a monetary policy used to stimulate the national economy by buying short term government bonds in order to lower short term market interest rates from commercial and other private institutions thus increasing the monetary base.
"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," Lebda concluded.
--Written by Juliette Fairley for MainStreet