Banks are opening, and 5% down payment is back.

Banks are opening, and 5% down payment is back. This may be good news for house buyers who are short of cash on hand: many banks are relaxing credit, requiring customers to just come up with...

This may be good news for house buyers who are short of cash on hand: many banks are relaxing credit, requiring customers to just come up with 5% down payment to get a mortgage loan to buy a house.

Since the real estate market bubble burst, buyers have to come up with a down payment equivalent to 20% of the house price before they can negotiate a mortgage with a commercial bank. Otherwise, they have to turn to the Federal Housing Administration (FHA) for low down payment loans.

Now, TD Bank, Bank of America and Wells Fargo all offer mortgages to customers with as little as 5% down payment.

>TD Bank's "Right Step" mortgage not only allows borrowers to get a loan with a 5% down payment, but also allows them to incorporate gifts equivalent to 2% of the house price from relatives and friends into the down payment, so the down payment they actually really need is only 3% of the house price.

reports that one of the reasons for this change is market opportunity. The Federal Housing Administration took over the low-down-payment market in full during the housing market collapse. Taking over those risky loans depleted FHA reserves and forced it to increase spending.

Over the past two years, FHA has increased fees. This year it required borrowers to purchase private mortgage insurance for the entire life of the loan, an expensive requirement that forced many would-be borrowers to look elsewhere.

Although low down payment mortgage loans are a high-risk business for private banks, which has caused many banks to be afraid to take over them before, rising housing prices have reduced its gambling nature. At the same time, banks believe they can offer better terms than FHA.

Malcom Hollensteiner, director of the retail lending department of TD Bank, said that the FHA has increased its fees and reduced market share, so we are launching alternatives to FHA mortgages.

Although private banks also require users with a 5% down payment to purchase private mortgage insurance, the purchase period they require is only when the homeowner's home equity reaches 20% of the house price, not the entire loan cycle.

That difference adds up to a sizable sum: 30 years of insurance premiums on a $200,000 fixed-rate mortgage would total $60,000.