Ingen a new survey conducted by Zillow, renters stated that the number one barrier for home ownership is the down payment requirements.

Renters also gave other barriers such as qualifying for a mortgage, a barrier more than 50% of renters say is holding them back, and another 50% say debt is holding them back. Almost 40% of renters answered that job security is keeping them from buying a home.

“While it is possible to put down as little as 3% on a home, the trade-off is a higher interest rate and costly private mortgage insurance, a financial trade off that may make sense for some buyers,” Zillow Chief Economist Svenja Gudell said. “But with interest rates rising in 2017, it’s important to remember that a lower interest rate can save buyers thousands of dollars over the  life of their loan.”

There is a push in the industry to allow people to purchase homes with less and less money down; or skin in the game. FHA requires 3.5%, and conforming loans now allow as little as 3% down. The down payment in many cases can be gifted, and there has been a recent explosion of Down Payment Assistance (DPA) programs that now allow borrowers to buy a home with $0 down. Low down payment and DPA programs generally do not discriminate for challenged credit either. Meaning a prospective borrower with limited or distressed credit history can by a home, using financing backed by the Federal government, with no money down. Zero!

If the government offers, and allows little or  no down payment programs, then the demand will follow. The US is a consumption driven society. Realtors market no down payment programs to renters who, have no down payments; who now become prospective borrowers. The prospective borrowers seek out the mortgage companies who offer such programs. And mortgage companies start lending on loan programs with a historically high default rate, to stay relevant in the market. Now everyone is participating in high risk loans.

For more information contact Geneva Financial Office at 805-354-0334