The debt crisis has become so bad, even doctors and lawyers are resorting to this…
Zero-Down Mortgages Are Back
Here is a portion of an article originally posted at thestreet.com: In the aftermath of the Great Recession, no-money-down mortgages got a bad rap, blamed for being part of a toxic brew of bad lending that crashed the real estate market.
But in a bid to reach credit-worthy buyers struggling to save up thousands to secure a loan, mortgage lenders are experimenting again with very low down-payment mortgages.
These are not your parents’ zero-down loans. Unlike the days of the real estate bubble of more than a decade ago, they require strong credit scores, mortgage brokers say…
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“There are significant barriers preventing people from attaining homeownership and one of the major barriers is the down payment,” says Elliot Schmiedl, homeownership director for the Massachusetts Housing Partnership. “The days of saving up 20 percent down are long gone — now it’s 3% to 6% and people even have trouble making those payments.”
United Wholesale Mortgage is promoting a mortgage in which the buyer would have to put down just 1%, with the lender kicking in an additional 2% as a gift. Buyers can’t get the deal directly from United, but have to go through a national network of independent mortgage brokers, according to the company.
Troy, Mich.-based Flagstar Bank and Cincinnati-based Fifth Third Bank have rolled out their own zero-down mortgage programs across much of the Midwest and parts of the South.
Flagstar offers its zero-down mortgages in low- and moderate-income areas of the state. The loans are targeted at those making between $35,000 and $62,000 and looking to buy in the $80,000 to $175,000 price range, according to the Detroit Free Press. The bank offers as a “gift” the 3% down payment plus up to $3,500 in closing costs in “challenged” areas like Detroit, where total assistance can go up to $7,500, according to a spokeswoman for the bank.
Fifth Third Bank offers no-money down for people looking to buy in low-income areas in several states, including Indiana, Michigan, Illinois, North Carolina, Ohio, Tennessee and Georgia.
The bank gifts the 3% down payment — up to a maximum of $3,600.
Low- or no-money-down mortgages are growing in popularity as the cost of buying increases. U.S. home prices have jumped 6.3% in December compared to the year before, according to the S&P CoreLogic Case-Shiller national home prices index. Many zip codes, especially in the Northeast and on the West Coast, have long since blown past their 2005/2006 highs.
Doctors & Lawyers Resorting To Zero-Down Loans
And these mortgages are not just popular among low- and moderate-income buyers. Many professionals, such as doctors and lawyers, are also dealing with large amounts of debt but, with solid credit scores, make good candidates as well for zero-down loans, mortgage brokers say.
“What if the house goes down in value soon after the purchase?” asks Mark Smith, president of Vision Wealth Planning in Glen Allen, Va., and a certified financial planner. “They will be upside down on the mortgage. The past is not a predictor of the future, but it sure is a good teacher.”
King World News note: In a world that has binged on massive amounts of unsustainable debt, when the bubble finally unwinds, JP Morgan will be proven correct in what he said…
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