July 31, 2021

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Mortgage News

Down payments should not be hurdle to home ownership

Peter Crowley is President of the Re / Max Alliance Group

As prices continue to rise across the real estate market due to the imbalance of supply and demand, concerns about the affordability of housing are increasingly at the fore of any skepticism about the sustainability of this market.

There are two main components to housing affordability: the down payment required to buy a home and the resulting monthly mortgage payment.

While most borrowers focus on the monthly mortgage payment, there is also a big misconception that at least 20% of the purchase price must be saved as a down payment on purchase. Prospective borrowers may be pleasantly surprised to learn that there are various loan programs that allow qualified borrowers to fund up to 100% of the purchase price, reducing (and in some cases eliminating) the initial hurdle for setting aside a large sum gets out of money to buy a home.

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The largest pool of products, which provides loans of up to 95% of the purchase price, is provided by state-secured mortgages from Fannie Mae or Freddie Mac. These loans provide qualified borrowers with more traditional loan products with additional mortgage insurance to cover the increased risk for borrowers choosing lower down payments on their home purchases.