Lots of real estate buyers are using zero downpayments

A recent Realtor study shows large number of buyers are using small down payments. Nationally about 30 percent of buyers and nearly 45 percent of first time buyers are buying their homes without using a downpayment.

This is a great thing for many homebuyers, but the lenders are taking large risks.

The concern our office has had for a long time is what type of penalty the buyer is paying for using a zero down loan. (In a typical case, on a $150,000 loan, a zero downpayment buyer will pay about $4,000 more for a loan over 5 years if they used zero down than if they used 5% down. Since 5% down would be $7,500 the buyer is losing a over 50% of the downpayment they might have made by choosing zero down.

There is one obvious strategy we've used to get around the penalty called 80/20/15.