Is a Low Down-Payment Loan Right for You?

Lenders are now offering the opportunity to put down as little as 3% when buying a home. The good news is, this time around they’re actually underwriting the loans properly (i.e. doing financial background checks) so as to avoid another subprime lending fiasco. Are you debating between taking out a low-downpayment loan or holding out til you can save up for a larger downpayment? There are lots of factors to consider, including your cash-on-hand needs, current mortgage and rental rates, and your long-term job outlook. This article walks you through the main pros and cons that you should consider when debating what path to take when it comes to financing your new home.


The lowdown on low down payments

MOLLY RILEY/REUTERS – The resurgence of low-down-payment financing may seem dangerous, but the loans are different this time

By Michele Lerner, Published: August 15

Mortgage down payments as low as 3 percent — and even 100 percent loans — are returning. That may be good news for buyers who haven’t accumulated a lot of savings.

But there are some trade-offs: Mortgage payments will be higher because more money is being borrowed and because private mortgage insurance is required for down payments that are less than 20 percent. With that in mind, buyers may want to consider renting for a longer time and saving more for a larger down payment to make sure they can truly afford a home…

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