This Is NOT Your Parents’ 3% Down Payment Plan

In their latest Housing Market Insight & Outlook report, Freddie Mac revealed that recent low down payment initiatives have raised concerns that we may be returning to the same lax mortgage qualifications that caused the housing crisis from which we are just now recovering.

The report went on to explain that today’s underwriting guidelines are nothing like those that existed just prior to the housing meltdown.

“Pre-crisis underwriting allowed layered risk, that is, the combination of multiple features that amplified credit risk. Low down payments often were combined with variable-payment loan structures, property-based underwriting, and questionable appraisals. These risk factors, along with the ‘irrational exuberance’ of some borrowers, led to large losses during the crisis.”

What is layered risk?

In the pre-crisis environment, many mortgage loans incorporated several additional features besides low down payments that multiplied the total risk of the loans such as: variable payment options, underwriting based on the property not the borrower, questionable appraisal processes. Borrower expectations were also overly optimistic at that time.

Freddie Mac highlights the difference between then and now by using a table in the report:

By removing the “layered risk”, we can be confident that low down payment programs will not impact the market the way mortgage underwriting impacted the market a decade ago. And the report explains:

“Previous research has found that reduced down payments can increase the relative probability of homeownership among some groups by over 25 percent.”

Bottom Line

We believe the report’s conclusion says it all:

“As long as the underwriting process bars the return of the layered risks prevalent in the pre-crisis era, lower down payments are not a cause for concern.”

Contact The J Team Fort Lauderdale Today and schedule a home buyers consultation at 954-235-3589, let us help you create a roadmap to your homeownership dreams and we will connect you with a mortgage professionals to help you learn about all the resources out there to help you buy a home now!

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How long after a Bankruptcy/Short-sale/Foreclosure can you buy a home?

The J Team Fort Lauderdale gets asked a lot by clients how soon they can buy a home after a Bankruptcy, Short-Sale, or Foreclosure?

Many people have had to do one of the three reasons in the past and seems a lot of people feel they must wait for these legal items to fall off their credit report before they can buy a home again.

Our in house Lender VanDyk Mortgage shared with us some very interesting facts regarding this question.

This is great news for clients who had financial issues in the past to qualify again to buy a home in as little as 2-3years for FHA/VA and 4-7years for Conventional.

No need to wait 10+ years for the legal matter to fall off your credit report.

Contact The J Team Fort Lauderdale today to schedule your Home Buyers Consultation where we can help you understand the market and buying process as well as connect you with a lender to begin the Mortgage process again.

The J Team Fort Lauderdale is committed to homeownership for all with education and solutions. 

Search Fort Lauderdale Homes now at http://JTeamFL.com