No more ‘no money down’: A good or a bad thing?
Back during the residential real estate boom, mortgage loan officers were happy to give home loans to borrowers even if those buyers put no money down.
At the time, mortgage professionals hailed the move as a way to open homeownership up to a greater number of people. After all, they said, the greatest barrier most people have to affording a home is scrapping up a downpayment of 10 percent or 5 percent of a home’s sales price.
Today, though, this is changing. No-money-down loans are disappearing. A greater number of mortgage lenders are once again requiring that borrowers come up with a downpayment of at least 5 percent of their home’s sales price.
This may keep many from purchasing a house. Here’s the question: Is this necessarily a bad thing?
I know it’s hard to come up with a downpayment. When my wife and I purchased our first house, it took us months to save up enough money for ours. But we did it. We were committed enough to owning a house that we waited until financially the time was right.
During the housnig boom, when mortgage lenders gave home loans to just about anyone who walked through their doors, the downpayment became just one more hurdle to overcome. Lenders helped buyers overcome it by offering a wide range of no-money-down loans. Not surprisingly, lenders today, seeing a record-setting number of foreclosures, are again embracing the concept of downpayments.
Personally, I think it’s a good thing. The days of the no-down loan should be history. If borrowers can’t come up with at least a 5 percent downpayment, they aren’t ready for the financial commitment of owning a house.
Tags: downpayments, financial responsibility, foreclosuresRelated Stories
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