Five Percent Down: A Fluke, or the Beginning of a Trend?
2026
As a Realtor who’s experienced all the ups and downs of the market during the past decade, it takes a lot to surprise me. But today, a pre-approval letter came across my desk that absolutely astonished me.
The letter was for a prospective buyer of a San Francisco condo. The buyer was only putting 5 percent down. We used to see such low down payments all the time before the credit/mortgage/housing crisis hit a few years ago. But in 2011—when many loans require 20 percent down?
I called the loan broker, figuring the loan was suspect. He assured me it is a legitimate loan from a reputable bank and that he had as much confidence in it as he would with a 20 percent down loan.
Honestly, I figured it would be years before we started to see low down payment loans again. Didn’t we need more time to put the crisis behind us? Didn’t we need a new generation of buyers and sellers in the market for whom 20 percent down is no longer the norm?
I have to assume that the banks know what they’re getting into, that the property will be checked and double-checked, and that multiple underwriters will review the loan. And I expect that the borrowers are stellar with verifiable income, as opposed to having only “stated income”, typical of the pre-bust when the borrower’s income was never verified by the bank.
Is this a fluke? Or is this a sign that the credit crunch is easing? It’s too soon to tell. But I’ll keep a close watch on this and report back.
