No Down Payment Loans
What is a No Down Payment Loan and who is eligible?
No Down Payment Loans is one of the strengths, as well as one of the weaknesses of the American home loan system. While there are many families out there that would have been unable to successfully get a home loan without a no down payment Loan, many others have been unwisely granted a (NDPL) that they cannot ultimately afford, which has, in part, lead to the recent American mortgage crises.
It’s a fact that no down payment home loans have a disproportionately higher default rate than standard home loans. The reason for this is simply because a person who has not invested as much in his or her home, has less to loose should they need to go into foreclosure. Those who have equity in their homes typically go to greater lengths to protect their investment for obvious reasons.
It can also be said that anyone who has shown they are able to save up for a down payment, is also someone who is more likely to be able to handle the responsibility of a home loan. Just as making consistent payments requires discipline, so too does saving.
While no down payment home loans are certainly becoming less common given the recent mortgage crisis, they are typically granted because the lender has confidence in rising home values. Over all, home values have been on the rise since World War 2. As equity is gained in a home’s value, the chances become less and less, that the borrower will default. Depending on the economic environment, lenders typically feel confident in their ability to predict the risks of granting a particular individual a no down payment loan.
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