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4 Risks of Low Down Payment Loans

Date: 02/04/2015        [ Go Back ]

(Here’s the Inside Scoop from Expert Dan Stone, Mortgage Fee Coach)

In recent news, you’ve seen that more lenders are lowering down-payment requirements.  Sounds like a great idea, right? People with good credit scores (see more on that soon) are being offered down payments as low as 3.5%.  In fact, Fannie Mae and Freddie Mac have even accepted down payments at the 3% level!

The idea is to help people with good credit own a home even if they have not been able to amass enough savings for a down payment. This might be particularly helpful in a market where housing is very expensive.

There are risks:
1.    If the price of your home goes down, you might owe more than the house is worth because you took out a bigger loan.
2.    You’re paying the interest on a bigger loan amount, and that reduces your ability to save money for other things.
3.    Mortgage insurance costs are higher on a larger loan.
4.    The interest rate and fees you pay for this lower down payment are higher.

Your credit score will determine if you’re eligible for a lower down payment option, and you may now be able to fulfill the American Dream of owning a home.

BUT PLEASE be careful that you understand the risks.

** Contact me and I’ll help you decide if it’s a good deal for you. **