Before the housing crisis, getting a home loan was easy. All you had to do was state your income and then sign on the dotted line.
After 2008, lenders have become strict. They required a minimum of 20% down payment. A lot of potential home buyers had a hard time coming up with that much money. Furthermore, the economy was uncertain, there were job cuts and purchasing a home was really scary.
As a result, even though home prices and mortgage rates were at historic lows, many home buyers were turned off to purchase a home.
At present, the real estate market is rising again. The economy is improving and job growth is evident. Potential home buyers are feeling good about investing in real estate again.
Good news for potential buyers thinking of buying a house, now that the economy is showing improvement. Mortgage lenders are starting to ease on the minimum down payment requirement. To qualify for a 10% down, your monthly housing, car, student loan, and credit card debt can't be higher than 45% of your monthly income. And you must have a 700 credit score.
If you have enough funds to make a 20% down payment, you might consider paying the 10% down and then investing the other 10% in stocks or mutual funds. But you have to take note of the risks.
Paying the 10% down also has its disadvantages too. If you just pay for 10% down and home prices decline later (like what happened in the past few years), you could end up owing more on the mortgage than your home is worth. You could end up underwater, stuck with your home and unable to sell.
Talk to a mortgage professional or a realtor about your options before making the down payment. Consider your long-term goal. Do not make the 10% down payment because you are able to. Weigh the pros and cons then decide.
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