During a recent radio show appearance, John Burns, CEO of the eponymous real estate consultancy, disagreed with host Jeff Lazerson's held wisdom on buying a new home.
One of the differences of opinion between the two men on the value of buying a new home was in regard to the traditional 20 percent down payment. According to Burns, the 20 percent down payment is "a myth." Writing for his company, John Burns Real Estate Consulting's website, Burns says, "Fifty-six percent of all homebuyers who obtain a mortgage are putting down 10 percent or less. More than half of all homes in the country are eligible for low down payment financing from FHA. These buyers do pay for mortgage insurance. It continues to amaze me how the conversation today still revolves around a 20 down payment."
The big home builders tend to offer incentives to homebuyers to use their inside mortgage company, but the buyer can always shop around and use their own mortgage company if they feel they are not getting a good deal. The builders offer the mortgage service both to capture the mortgage profits and to control the home closing process. Builders don’t want to deal with the many last minute problems at closing that are frequently caused by lenders.
