Lenders Increasingly Allowing Smaller Down Payments

By Christine Springer

It is interesting to read a story from mainstream media discussing the return of low down payment programs for home buyers. It seems like it's been years since these kinds of programs have been available.

The New York Times has a recent article that discusses several down payment programs that allow buyers to put down as little as 3%.

The most interesting thing about this story is that these programs are now portrayed in a favorable light. A couple of years ago, just as the new car market heated up, similar stories about how it was getting easier to obtain a car loan were everywhere. The media was worried about subprime auto loans causing the next recession, just as the economy was stabilizing. The real estate market and the car market aren't really comparable, though, for several reasons.

Still, we must be at a turning point if the media isn't freaking out over low down payment programs for mortgages.

The other interesting aspect of this story is that the NYT suggests that credit unions have more flexibility to offer loans with smaller down payments because they hold the loans they make.

That is what caught my attention about this story. Holding the loans on your books means no MERS (if MERS is still being used, that is...) and no issues with your title. It could also mean that if you were foreclosed upon, there wouldn't be much leverage to stop foreclosure in the documents.

The other strategy discussed for home buyers is the piggyback mortgage. You may remember that the piggyback was the preferred way to avoid taking out mortgage insurance pre-recession. Those too are making a return.

What do you think about the article and the strategies discussed?