The other day, while in the office, my coworker showed me a CNBC article about "no-doc" mortgage loans. Just to summarize in a nutshell, no-doc mortgages are loans that require little to no documentation. Many argue that no-doc mortgages were one of the reasons why the 2008 housing bubble occurred.
With the housing market booming--single family home prices on Oahu continue to increase--lenders are trying to find ways to get millennials to purchase their first home. Recently, Wells Fargo announced their new 3 percent down mortgage program. Although sub 20 percent down mortgages are not uncommon, one can only wonder if 3 percent is enough "skin in the game."
Just the other day, a prospective Buyer contacted me about purchasing her first home. One of her main concerns was having enough down payment. To be honest, the down payment is a big concern for all my clients.
There's no cookie-cutter answer for this. The reason is, it all depends on that Buyer's finances. Some of my clients might have access to more money than others. In today's market, it would be great if Buyers purchased all cash. However, that's not realistic for many people. Just because someone has 25-30 percent down doesn't mean it's the right option for that Buyer. Maybe it's best for that person to put 20 percent down so he/she can use the rest of his/her money for home improvements (as opposed to liquidating all of his/her cash). The best thing for a prospective Buyer to do is to speak with an experienced mortgage lender.
Mortgage regulations have improved since the housing crash. However, it'll be interesting to see if programs like Wells Fargo will help or hurt home buyers. Only time will tell and lets hope history doesn't repeat itself.
-RO
Sources: CNBC, HiCentral, OCRegister.com.
Disclaimer: This is a personal blog. Ryan Oda (#RS-75450) is a licensed real estate salesperson with Benn Pacific Group, Inc (#RB-19423). The opinions expressed here represent my own and not those of Benn Pacific Group, Inc., its agents, and or its affiliates. My thoughts and opinions can change over time. This blog is intended to provide a semi-permanent snapshot of a selection of various thoughts and opinions that may not be the same, or even similar, to those I may hold today.
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