Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on bigger issues.
Motley Fool is lining up the options for the best low-down-payment mortgages.
It’s an interesting comparison; do you know how the programs differ?
Here’s a quick wrap of the salient parts of the article,
The most widely known low-down-payment mortgage program is the Federal Housing Administration, or FHA, loan. Not only do FHA loans have down-payment requirements as low as 3.5%, but the down payment can also come from the seller or a gift. In addition, there are some other reasons to consider an FHA loan.
Fannie Mae's Home Ready program allows for 3% down payments with credit scores as low as 620 — so it doesn't exactly require great credit but is more selective than FHA financing.
Freddie Mac's Home Possible Advantage program is similar, but there are a few minor differences. Credit requirements are slightly higher, with a 660 minimum credit score, but mortgage insurance costs are generally lower. This program can be used for purchases or refinancing. Unlike the Fannie Mae program, all borrowers must be occupants of the home.
VA and USDA are also mentioned, and it’s suggested that potential homeowners also check local lenders for options as well.
One portion of the population not interested in these mortgages are those families on the lower-income side of the economic spectrum.
"There are still major hurdles for low-income people trying to get a mortgage after the recession — and many potential first-time home buyers are opting to keep on paying those monthly rent checks," according to Dina Gachman of Marketplace.
At the Federal Reserve Bank of New York’s Economic Press Briefing this week, New York Fed President Bill Dudley said that 12% of low-income people credit applicants are so-called “discouraged borrowers” — those who needed credit but "were discouraged to apply since they believed they wouldn’t be approved," according to the Fed's Survey of Consumer Expectations.
So, it's really too bad, considering the aforementioned low down payment mortgages were arguably designed to help serve this same economic group.
And, more importantly, why are these borrowers so discouraged?
Maybe, just maybe, Philly.com has the answers.
As columnist Alan Heavens explains, mortgages remain at the very top of consumer complaints list for loans.
Richard Cordray, director of the Consumer Financial Protection Bureau:
"Despite strong protections that have been put in place to protect homeowners, this month's complaint report shows consumers are still having problems when dealing with their mortgages."
Rising home prices also continue to be a double-edged sword. The S&P/Case-Shiller Home Price Index, covering the entire nation, rose 4.7% in the 12 months ended in August, slightly greater than a 4.6% increase in July.
On one hand, in some markets rising prices mean low-income wage earners can't afford to buy. And rising rents aren't helping them much either.
On the other hand, some markets, like the Twin Cities, are still afflicted with high levels of negative equity.
Will we never find a way to balance this market? Please leave any suggestions on the message boards below.
The Federal Deposit Insurance Corp. closed no banks for the week ending Nov. 6.
