As reported to Daily Real Estate News in Realtor Mag, Friday, May 02, 2014
About 60 percent of first-time home buyers make a down payment of 6 percent or less for a home, according to the March REALTORS® Confidence Index.
But with rising insurance premiums for loans insured by the Federal Housing Administration,
traditionally a popular first-time buyer option, more first-timers are
having to look elsewhere for financing their home purchase, The New York
Times reports. First-time buyers are looking to special programs
through banks, state and local down payment assistance programs, and
their own families for assistance in purchasing a home.
More lenders are offering low down payment programs. For example,
T.D. Bank offers the Right Step mortgage, which features a minimum down
payment of 3 percent (down from 5 percent), and a maximum debt-to-income
ratio of 41 percent. Private mortgage insurance is not required with
the loan for applicants who are making down payments of less than 20
percent. Instead, the lender requires all applicants to go through a
housing education class.
“We’re enhancing this program to provide financing to more eligible
borrowers, but we don’t feel as if we’re easing the credit guidelines,”
says Malcolm Hollensteiner, T.D.’s director of retail lending. “Our goal
is to increase the pool of creditworthy borrowers.”
Down payment assistance programs are being offered through state and
local housing agencies. For example, in Long Island, the Community
Development Corp. has teamed with the Housing Development Fund to
provide a SmartMove program, offering first-time buyers down payment
assistance via a second mortgage. Qualified borrowers can put down as
little as 1 percent and cover up to 20 percent of their purchase price
through a second mortgage, which then eliminates the need for private
mortgage insurance. The 20-year loan has a low rate of 3 percent.
Families are also stepping in to help more first-timers buy. For
example, National Family Mortgage in Waltham, Mass., sets up
intra-family financing at low interest rates, The New York Times
reports. The loans meet IRS requirements for a loan, as opposed to a
taxable gift.
Source: “Low-Down-Payment Loans,” The New York Times (May 1, 2014) and “60 Percent of First-Time Buyers Put Down 6% or Less,” National Association of REALTORS®’ Economists’ Outlook Blog (May 1, 2014)
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