Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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Assessing Down Payment Levels

Orange County, CA – Borrowers often ask “Just how much of a down payment do we need?” Frankly, it’s not an easy question to answer anymore! There was a time when we all had the leverage necessary to invest very little. We relied on the appreciation of the property value to create a return and protect the lenders. Of course, we’ve had a somewhat turbulent market over the last few years and we’re just not in this sort of position anymore. For sure, it would appear the prices are starting to steady. And in many areas, like Orange County, we’re even seeing a rise in valuations and transaction prices. But this doesn’t mean that lenders are yet prepared to loosen the purse strings.

We’re in a climate where lenders want some leeway and protection for themselves. This does have its benefits for buyers though. But to a large degree, the way you deal with down payment levels has to do with your own financial situation.


There are plenty of people looking for property in the luxury home markets who are able to invest a significant down payment and thus avoid the more expensive mortgages. The other advantage of course is that this particular market is moving well at the moment, and the potential for increased values means that many are enjoying a good yield on properties purchased.  At the moment we are coming from a point in time where we’ve seen yields on deposit accounts at record lows. While there are still concerns on the future returns on securities, people are looking to maximize their savings. For the first time in a long time, it appears that property is a good way to do that.


Many other home buyers are simply increasing down payments as a matter of choice. They’re tired of being in debt to such a significant degree. The personal risk and uncertainty that comes with carrying too much debt can be burdensome. People are trying to pay off their credit cards and bank loans. Having a huge mortgage on top doesn’t necessarily appeal to some. In addition you will find that with an increased down payment you will save on interest. Others simply want to keep their “rainy day” fund intact to allow for breathing room. In my opinion, every homeowner should have a “rainy day” fund. Therefore, a more manageable mortgage in this climate may be the best way forward.


Minimum down payment levels have increased over the past years. The reasons for these changes are many and varied. With high levels of unemployment, market uncertainty and persistently high levels of foreclosures and short sales, the risk to lenders is still pervasive. Thus underwriting guidelines have changed significantly. This means that down payments simply have to be higher to offset the risk to the lender. They need to protect their investment and protect you the borrower. We want you to be in a position to succeed with your home loan. Failure does not benefit anyone.

That being said, there are some great programs out there for all home buyers – seasoned or first timers. For those wanting a higher level of loan, there are some excellent jumbo loans available in the right circumstances. You can expect a minimum down payment of 20% on jumbo loans. For those seeking lower down payment options, plan on putting down 3% – 5%. In some cases, you can invest as little as 0.5%!

The important thing really is to make sure you assess all of your options before jumping into something. There are certainly more mortgage options than you might have found a year ago, so you have even more options. Make sure you don’t over borrow, and seek advice at every turn before going for that picture perfect house you’ve always dreamed of!

When you hit those turns and need an advisor, please contact me. I’ll listen to your needs and asses your individual scenario with you.

Scott Storace

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