So you say you want to buy a home but you’re locked out of the market because you don’t have enough money for a down payment. Or you don’t have adequate savings to meet lenders’ requirements on financial reserves. Or you have a “thin” credit file that lenders find tough to score and accept.
Understood. But have you checked out what’s been going on in the mortgage market lately? Are you aware of the multiple low-down-payment, consumer-friendly new options that have been launched recently — the latest just within the past week?
Maybe not, so here’s a quick overview. Pushed by regulators and consumer groups to expand home loan opportunities for first-time and moderate-income buyers, major mortgage players have come out with nationwide programs designed to turn renters who are creditworthy — but don’t have big down payments or closing-cost cash — into homeowners.
New program
The newest option, known as the Affordable Loan Solution plan, launched Feb. 22. It allows for down payments as low as 3 percent, no minimum cash reserves, loan amounts as high as $417,000 and, unlike other low-down-payment mortgages, there are no charges for traditional private mortgage insurance. The latter alone can sometimes add hundreds of dollars a month onto buyers’ costs and make ownership difficult to afford, so this is a big deal. For applicants with thin or no credit bureau files, the program allows for consideration of nontraditional forms of credit, such as monthly rent payments, utility bills and the like. There is no minimum required contribution toward the down payment and closing costs, so applicants can supplement their own cash with gifts, such as from parents, or even use grants or secondary financing that is available through some local government agencies. Significantly, applications won’t go through the usual automated underwriting systems that generate instantaneous approval-disapproval decisions. Instead, they’ll be handled the old-fashioned “manual” way, allowing for more individualized evaluation — and verification — of applicants’ situations.
