The question is frequently asked – do home-buyers care about how much money they need to put down or the interest rate they receive on the mortgage loan. Do one of these factors drive housing demand more than the other?
The Federal Reserve recently studied this question in the 2014 SCE Housing Survey and found that the amount of the required down payment tend to have a large effect on the willingness of a buyer to pay for a certain home. This is especially true among current renters.
The effect of the current interest rate is not as pronounced – i.e. a change in mortgage rates has only a modest impact on willingness to buy. You can read more on the study and it’s implications by clicking this link: Do Borrowers Care About Down Payment Amounts and Interest Rates