Home buyers getting help with low down payment loans

Six years after the housing market collapsed and credit tightened, some South Florida-based lenders are easing up on the 15 percent to 20 percent down traditionally required for a conventional mortgage.

Tropical Financial CreditUnion and The Mortgage Firm are among those awarding lowdown payment loans, usually to first-time home buyers with great credit. So is TD Bank that has nine branches in Broward and 25 in Palm Beach.

“It’s a great loan for people who don’t have a lot of money to put down,” said Doug Leever, mortgage sales manager for Miramar-based Tropical Financial. “We just started it a fewweeks ago.”

The loans, though, have some experts concerned about a return to the loose lending standards that led to the housing bubble in the first place.

South Florida banking analyst Ken Thomas opposes them, saying buyers

“don’t have enough skin in the game” if they just put down a few thousand dollars. That’s what got South Florida into trouble, with one of theworst housing busts in the country, he said.

But Adam Cohn, senior mortgage banker for the Mortgage Firm in Deerfield Beach, says these new loans are conservative compared to the boom years, when lenders approved mortgages with no money down to people whowere not required to showproof of employment or their ability to pay.

“Those days are gone,” he said.

The new loans are heavily scrutinized to make sure applicants can pay mortgages for homes that are appreciating in value, Cohn said. They help South Floridians who find it difficult to come up with the conventional 15 to 20 percent down payments, he said.

“They have good jobs and the ability to pay but not the money saved,” Cohn said.

Cohn recently obtained a home loan for Ashraf Abualsuod, who couldn’t afford to put more than 5 percent down but had a 750 credit score, which is considered excellent.

Abualsuod said the mortgage allowed him and his wife to quickly buy a home in a gated Coral Springs community at a time when houses in Broward and Palm Beach counties are being snapped up quickly.

The couple lost out on two homes because they waited overnight to mull over giving a bid. The next morning, the homes were already under contract, Abualsuod said.

“Itwas very frustrating,” he said.

Plus, they didn’twant to use all their savings to buy a home, he added. “It’s always better to have some cash on hand,” Abualsuod said.

It also was worth it to pay a slightly higher interest rate – 3.875 percent – for their fixed 30-year loan rather than wait to save enough money to get a loan about half a point cheaper with15 or 20 percent down, he said.

At the moment there is no evidence or indication that larger lender are offering low-down payment loans but Cohn believes they are watching how firm and other financial institutions take on the risk in making the loans.

In western Lake Worth, Jennifer Buzzelli said getting a loan with only 3 percent down will allowher to have cash to repair a home she is buying from a short sale.

She already had lost out on four homes before qualifying for the new loan at The Mortgage Firm. The housing market “is very competitive,” Buzzelli said.

Some lenders, such as Tropical Financial and TD Bank, allow buyers to use gift money for at least some of the down payment. Traditionally, that has been frowned on as lenders wanted to see that applicants had the financial ability to pay for all the down payment.

TDBank is also trying to help their low-down-payment mortgage clients with counseling and a home ownership seminar so they will knowabout homeowning expenses and how to budget for them, said Hermes Alvarez withTD Bank in Fort Lauderdale.

So far the loans are paying off, said Tropical Financial’s Leever.

“People are paying their mortgages,” he said.

TAIMY ALVAREZ/STAFF PHOTOGRAPHER Ashraf Abualsuod and his wife, Samar Abdel-Jabbar, were able to get a mortgage on their Coral Springs home even though they only put down 5%. Ashraf and Samra are grateful they got a loan at 3.875 percent.