Mortgages with only 5% down

Posted by Tyler Dock on Thursday, November 14th, 2013 at 2:23pm.

Correct me if I'm wrong, but didn't the collapse of the economy mostly rest on the shoulders of low-down payment mortgages? I know it's far more complex than that, but for all intents and purposes, banks were handing out mortgages to unqualifed applicants for little money upfront.

Following the collapse of the housing market, buyers were required to pay as much as 20% down or they had to turn to the Federal Housing Administration for a low down-payment loan. But as the FHA has been raising premiums and started requiring borrowers to buy private mortgage insurance for the life of the loan, many prospective borrowers are looking elsewhere.

Since 2008, low-down payment loans, such as 5% down, were far too risky for private lenders, the banks, to take on before, rising home prices (which I wrote about last week) have made them less of a gamble. Additionally, the banks think they can offer a better deal than FHA. Now banks like TD Bank, Bank of America, and Wells Fargo are loosening their down payment requirements and offering 5% down loans.

Tyler Dock

Twitter: @tsdock

LinkedIn: https://www.linkedin.com/in/tylerdock

Leave a Comment