The most stressful part of buying a home in 2018 is dealing with Interest Rates for most people. The thought of purchasing a home or having the ability to purchase sounds enticing.
However, what many house hunters, are not prepared for is are the increasing interest rates and prices of these homes.
Many people think that when they only put 3% or 5% down that their interest rates will not reflect that. That is rubbish.
Michael Frantantoni of Mortgage Banker Association wrote in the Wall street journal
We’re seeing an increasing number of people choose low down-payment loans and take advantage of down-payment assistance programs,”
he also notice a trend in Usage of gift funds for financing. Any time a buyer puts less than 20% down they are putting themselves at risk of having a higher than normal interest rate. From personal experience, most of my formal clients at Wells Fargo wanted to go for a Down payment assistance program where they could possibly get a loan with 3.5% or sometimes even 0% down.
This poses great risk for lending institutions and banks because right away you are beginning the loan on your home with 97% Loan to Value and as little as 3% equity stake in the home.
The ability to repay that loan can become questionable in some instances.
Please check out this article written in the Wall street Journal below that talks about the issue that is causing some stress among New Home owners.