Dealing with a 20% Down Payment

Home buyers may now need to pull out their calculators when tackling a common dilemma: what to do if they don't have enough money for a 20% down payment.   In recent years, piggyback loans, low-cost and easy to get, have been the product of choice for many cash-strapped consumers eager to purchase homes. But with short-term interest rates now sharply higher — currently above 8% — piggyback loans are less appealing. Now, there are signs that some borrowers are giving traditional private mortgage insurance a second look.

New federal tax legislation expected to be signed by President Bush today gives some consumers even more reason to turn to mortgage insurance. The new law makes the insurance premiums tax deductible for some borrowers who take out new mortgage-insurance contracts in 2007. That is in addition to the tax deduction homeowners can already take on the mortgage interest they pay.  

Find out what to do if you can't make a 20% down payment on a home…

Housing Market Analysis

The Commerce Department reported that housing construction rose by 6.7 percent to a seasonally adjusted annual rate of 1.588 million units.  However, as with the inflation report, analysts said the overall number was misleading and not an indication that the severe slump in housing was coming to an end.

They noted that the rebound followed an even bigger 13.7 percent drop in October. Even with the November gain, housing construction was 25.5 percent below the level of a year ago.  And applications for building permits, considered a good indication of future construction activity, fell for a 10th consecutive month, dropping 3 percent to an annual rate of 1.506 million units.

"Great weather and an abysmal October probably played more of a role in the construction rebound than a firming of the market," said Joel Naroff, chief economist at Naroff Economic Advisors.

Mark Zandi, chief economist at Moody's Economy.com, said he believed the country was about two-thirds of the way through a severe housing correction that has already lowered overall economic growth by more than 1 percentage point. The correction has forced builders to lay off thousands of construction workers and offer attractive incentives to move homes already built.   Zandi said, "Most of 2007 will be another tough year for anyone in the housing industry."