A new study by Black Knight Financial Services shows the importance homebuyers making a cash downpayment and the potential for balancing different mortgage downpayment requirements with other relevant compensating factors to
manage mortgage credit risk.

Researchers discovered that higher down payments had decreased the delinquency and default risk. The study also quantified the magnitude of macroeconomic effects on delinquency and default risk, such as unemployment, home price appreciation, and mortgage rates—and effects of their interaction with loan-level factors—were also reported.

The facts are and have always been that a larger cash downpayment helps in mitigating mortgage credit risk but it also acts as a barrier to homeownership for many low- and moderate-income households. Although potential substitutes and credit risk alternatives for such as mortgage insurance serve as a protection against lender loss, larger downpayments seem to be the gold standard at preventing delinquencies and defaults.

Here is a PDF copy of the study:

[pdf-embedder url=”http://www.loansafe.org/wp-content/uploads/2017/08/Downpayment-FinalReport.pdf”]