Low Down Payment Loans Return to California
One casualty of the mortgage meltdown was the disappearance, especially in California and other “declining markets,” of private mortgage insurance (PMI) companies. These were the ones that handled the majority of home loans where the borrower put down less than 20%.
With PMI companies no longer backstopping these low-down mortgages, borrowers flocked to FHA loans, the only game in town. The result was that, last year, FHA insured almost 30% of all home loans, an unsustainable amount. This lead to increases in FHA mortgage insurance and other policy changes that have made these loans more expensive for the borrower.
The good news for Californians is that those with as little as 5% down can now, once again, get a loan if they have good credit and the house passes appraisal muster. A larger number of buyers will now be able to enter the market, which will ultimately be a blessing for sellers as well.
Read this article for more details, “Private Mortgage Insurance Companies Return to Market.”