$500 moves you in: The new no-money-down mortgages
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Good morning. There’s an excellent piece of enterprise reporting in this morning’s Wall Street Journal about the new wave of no-money-down mortgages built on government-backed loans.
The Journal’s Nick Timiraos: ‘The offers -- including ‘100% financing’ -- are made possible due to down-payment assistance programs run by nonprofit organizations. These programs are funded largely by home builders and also by private homeowners desperate to sell. The seller-funded groups provide enough down-payment money to buyers that they can qualify for a mortgage backed by the Federal Housing Administration, which requires at least a 3% down payment.’
More: ‘D.R. Horton Inc., the nation’s largest home builder by volume, is touting ‘100% financing’ for its two- and three-bedroom condominiums near the beach in Maui, Hawaii, which start at $498,000. In the Seattle area, local builder Quadrant Corp. is advertising townhouses that can be purchased with as little as $500 down. ‘Use your coffee budget to move into a new home,’ says an online promotion.’
The FHA says borrowers who receive a down payment from a nonprofit group are two or three times more likely to default, the Journal reports. It estimates that such borrowers now make up 34% of all FHA loans -- up from 2% in 2000.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.