Could Low Down Payment Programs Sink Housing Again?

Depending on who you ask about low down payment programs, you’re bound to get varying opinions. While some believe that zero- to low-down-payment loans were partially responsible for causing the housing bubble, others think that these programs are much needed to help grow housing.  Here’s why many believe that an increase in 97% loan-to-value (LTV) lending returning to housing isn’t something to fear:

 

  • Today’s housing market isn’t the same as it was in 2007. An increase in lending regulation has addressed many of the issues which spurred housing’s demise eight years ago.
  • If homeownership rates are to increase, low down payment programs need to be available. For example, the median price home price in Orange County in January was $674,340.  This means that for a conventional 20% down payment, a whopping $134,868 would be needed.  This amount just isn’t realistic for most first-time homeowners.
  • Low down payment programs are needed for the housing and mortgage industries to thrive. They aid in allowing renters to transition to homeowners, planting roots and helping to establish well founded communities.

So as you can see, the 97% LTV programs are much more likely to keep housing afloat, than to sink it given the current market and economic environment.

   

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