Why the return of low down payment mortgages is a good thing

 After reading some of the recent reports on HousingWire and other outlets on the limited return or the risk associated with low down payment mortgages, plus the comments accompanying those articles, a reasonable person would think a low or even zero-down payment mortgage is a very dangerous proposition.

In fact, nothing could be further from the truth. I would suggest down payments as an indicator for mortgage performance is one of the most misunderstood factors in evaluating lending risk. 

The mortgage market today is very different than it was just before the start of the most recent housing crisis and the incremental moves taking place now to provide opportunity for homeownership to credit-worthy borrowers who are committed to doing what it takes to be long-term, successful homeowners are what the market needs. They’re good for consumers, for the housing and mortgage industries and ultimately a critical step in stabilizing many communities across the United States

The rate of job growth is strong and overall economic activity measured by gross domestic product also is positive. The housing market, however, has not fully recovered, despite the broader march of growth. Before the current conditions, no one would have believed that housing would be such a weak participant in the economic recovery if mortgage rates were as low as they have been for as long. The 30-year fixed rate mortgage has averaged below 4.5% for most of the past 18 months, and for much of that time has been below 4%.

For too long after the housing crisis, lenders kept the credit flow cut off for anyone but the most pristine borrowers, or to those who had the cash to put down at least 20% – often the borrower had to have both. Yes, lower down payment mortgages were available, but obviously not in large enough numbers to move the home sales market from just scraping by.

NeighborWorks America wants the housing market to do more than just scrape by. We want it to thrive because homeownership is a critical part of a strong community and a strong personal financial balance sheet. That’s why low down payment mortgages are so important.

see more: http://www.housingwire.com/blogs/1-rewired/post/33220-why-the-return-of-low-down-payment-mortgages-is-a-good-thing