It is an understatement to say that the mortgage milieu is now drastically different. One of the biggest differences is low down payment mortgages that only require 3-5% down on your total mortgage. So why have mortgage down payments been threatening to hit rock bottom as of late?
A substantial part of the reason why down payments are smaller is because of the sharing of risk amongst parties involved in your financial transactions. In short, mortgage lenders are objective financial institutions - their goal is to increase their own profit, and in previous years, the amount they used to require for a down payment before the risk could be spread to Fannie Mae was a healthy 20%. Since the process of selling loans to Fannie Mae is now one that can be considered ubiquitous, the lowered risk has led to lower down payments required by the mortgage lenders.
Next thing to be discussed in brief would be the process of taking out two loans simultaneously, in order to obtain a loan without having to spend that much. One is a primary loan to cover the main mortgage, and another is a secondary loan to cover the down payment. This is an especially popular maneuver nowadays, and is loosely known around the industry as piggy backing loans. In other words, you are taking out a second mortgage, which may be the most proper term for such a practice. You will essentially have two loans to pay each month, so your debt load is going to be higher. You have to think twice before considering such an option - it is a calculated risk, to be sure, but not exactly the type of risk you would want to take if you are strapped for cash to pay for your down payment, not to mention saddled by the burden of paying other expenses.
There are a few qualifications required for somebody to qualify for an FHA loan, which requires an especially low down payment of three percent. The caveat here would be loan insurance, as a means to extenuate some of the risk involved, and the loan amounts in here would not be that significant. Typically these loans would not be available in areas where the cost of living is much higher than most.
Veterans administration loans can be utilized by military families looking for mortgages with lower down payments.
A substantial part of the reason why down payments are smaller is because of the sharing of risk amongst parties involved in your financial transactions. In short, mortgage lenders are objective financial institutions - their goal is to increase their own profit, and in previous years, the amount they used to require for a down payment before the risk could be spread to Fannie Mae was a healthy 20%. Since the process of selling loans to Fannie Mae is now one that can be considered ubiquitous, the lowered risk has led to lower down payments required by the mortgage lenders.
Next thing to be discussed in brief would be the process of taking out two loans simultaneously, in order to obtain a loan without having to spend that much. One is a primary loan to cover the main mortgage, and another is a secondary loan to cover the down payment. This is an especially popular maneuver nowadays, and is loosely known around the industry as piggy backing loans. In other words, you are taking out a second mortgage, which may be the most proper term for such a practice. You will essentially have two loans to pay each month, so your debt load is going to be higher. You have to think twice before considering such an option - it is a calculated risk, to be sure, but not exactly the type of risk you would want to take if you are strapped for cash to pay for your down payment, not to mention saddled by the burden of paying other expenses.
There are a few qualifications required for somebody to qualify for an FHA loan, which requires an especially low down payment of three percent. The caveat here would be loan insurance, as a means to extenuate some of the risk involved, and the loan amounts in here would not be that significant. Typically these loans would not be available in areas where the cost of living is much higher than most.
Veterans administration loans can be utilized by military families looking for mortgages with lower down payments.
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