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Homebuyers are making larger down payments as loan volume keeps falling

Mortgage origination volume continues to decline as homebuyers receiving loans bring more money to the closing table.

The median down payment on single-family homes and condos purchased with financing reached its highest point since the data was first recorded in 2000’s opening quarter, according to Attom Data Solutions. The second quarter of 2018 had a median of $19,900, up 18% year-over-year from $16,925 and up 19% from the previous quarter‘s $16,750.

“Buyers are upping the ante when it comes to down payments, evidenced by the record-high median down payment for homes purchased in the quarter, and an increasing number of buyers are getting help from co-buyers,” Daren Blomquist, senior vice president at Attom Data Solutions, said in a press release.

The second-quarter down payment figure was 7.6% of the median sales price, marking the highest percentage in nearly 15 years. It’s a rise from 6.6% of the median sales price both year-over-year and quarter-over-quarter.

Larger down payments mean homebuyers have more skin in the game and lenders are better protected against default. Lenders assume less risk, but it also results in smaller loan amounts that drive interest earnings and loan officer commissions.

While the median down payments reached a high-water mark, mortgage originations declined for the third consecutive quarter, as purchase loans, refinance loans and home equity lines of credit all dropped.

Over 1.5 million loans secured by residential property were originated in the second quarter, dropping 27% year-over-year and 16% from last quarter. It marks the lowest level of originations since the first quarter of 2014.

Purchase loans accounted for 662,713 of all residential loans originated, down 28% year-over-year and a quarterly decrease of less than 1%. Refinance loan originations fell to 591,868, declining 27% from a year ago and 26% from last quarter.

There were 272,852 HELOC origination volumes, a 23% drop year-over-year and a 22% quarterly decline.

“Rising mortgage rates are cooling mortgage demand across the board, with overall originations down to their lowest level since 2014 — the last time we saw more than six consecutive months with average 30-year fixed mortgage rates above 4%,” Blomquist said.

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