NEW YORK – June 21,
2013 – The 10 percent downpayment may be back. Reportedly, some lenders are
offering 90 percent financing once again on all loan types.
RPM Mortgage, based in San Francisco, resumed its “piggyback” loans in the first quarter of this year. The company had put its piggyback loans on hiatus in late 2007 during the financial crisis. In a piggyback loan, one lender loans 80 percent, while a second lender loans enough to equal 20 percent of the purchase price when combined with the buyer’s downpayment. The tactic allows the buyer to avoid paying private mortgage insurance (PMI).
The last few years, lenders have tightened up their underwriting standards and raised their downpayment requirements, mostly by enforcing a minimum of 20 percent down. That has kept some buyers on the sidelines. But certain lenders say they’re starting to cautiously ease up as home prices rise and the market picks up.
However, Julian Hebron, vice president of RPM Mortgage, says to qualify for a 10 percent downpayment, applicants must still meet some high standards. For example, they must have a credit score above 700 and have monthly housing, car, student loan and credit card debt that is no higher than 45 percent of their earnings.
In some cases, lenders are reportedly allowing borrowers to come with downpayments as little as 5 percent, although those tend to come with private mortgage insurance on conforming loans that are less than $417,000 and reserved for the most credit-worthy borrowers, says mortgage lender Tom Gildea of Prospect Lending in Rockland County, N.Y.
RPM Mortgage, based in San Francisco, resumed its “piggyback” loans in the first quarter of this year. The company had put its piggyback loans on hiatus in late 2007 during the financial crisis. In a piggyback loan, one lender loans 80 percent, while a second lender loans enough to equal 20 percent of the purchase price when combined with the buyer’s downpayment. The tactic allows the buyer to avoid paying private mortgage insurance (PMI).
The last few years, lenders have tightened up their underwriting standards and raised their downpayment requirements, mostly by enforcing a minimum of 20 percent down. That has kept some buyers on the sidelines. But certain lenders say they’re starting to cautiously ease up as home prices rise and the market picks up.
However, Julian Hebron, vice president of RPM Mortgage, says to qualify for a 10 percent downpayment, applicants must still meet some high standards. For example, they must have a credit score above 700 and have monthly housing, car, student loan and credit card debt that is no higher than 45 percent of their earnings.
In some cases, lenders are reportedly allowing borrowers to come with downpayments as little as 5 percent, although those tend to come with private mortgage insurance on conforming loans that are less than $417,000 and reserved for the most credit-worthy borrowers, says mortgage lender Tom Gildea of Prospect Lending in Rockland County, N.Y.
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