No Money Down Disappearing as Mortgage Option

[cal04]

Home buyers again need their own money to close a deal.

Lenders faced with growing piles of bad loans, even to borrowers once considered good credit risks, have clamped down on the no-money-down mortgage. The abrupt shift threatens to dash the hopes of millions of potential buyers, especially those shopping for their first homes.

Four out of 10 first-time buyers used no-down-payment mortgages in 2005 and 2006, according to surveys by the National Association of Realtors. But some lenders are now scrapping such loans completely. Others are pickier about who gets them. All figure that the more cash borrowers put down, the less likely they are to default.

"No-down-payment loans are just about near impossible to get right now," said Jennifer Bridges, a real estate agent in Woodbridge at ERA Blue Diamond Realty. "We'll have someone all lined up and then without warning, the lender will say: 'It's gone.' It's terribly depressing."

http://www.washingtonpost.com/wp-dyn/content/article/2007/08/04/AR2007080401418.html?hpid=topnews

[NMDemDist2]

1. as well they should be

I can't believe they wrote as many as they did

[Gormy Cuss]

2. As the article points out, that product was designed for low risk, wealthier individuals

as a way for them to avoid liquidating other investments in order to buy a house (that is, people who could put 20% down, but didn't want to do so.) The truly scary trend was not just zero downs but zero down/stated income loans. Twenty percent down may be too tough a standard these days but IMHO if you don't have something, say 1-5%, to use as a down payment you probably shouldn't be trying to buy at all. More to the point, the lender probably shouldn't be extending you credit.

[cliss]

3. I agree.

And I'm not so sure I buy the concept of "millions of 1st time home buyers". I read somewhere that around 40% of all the no-money-down mortgages were "flip" properties, or at the very least they were 2nd properties.

Meaning = they were just as an investment, and not as a primary home.

Well baby the sands of the hourglass just ran out.

I know some people who are going to get crushed in the upcoming vice.