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Looking for No-Money-Down Mortgages? Become a Silicon Valley Techie

With payments for student loans, credit cards, car loan, and rent due each month, it ain’t easy setting aside a decent chunk of change for a down payment on a home—particularly in some of the country’s priciest regions.

But it seems that Silicon Valley–area techies are in luck. Mortgage lenders are vying for those well-paid Bay Area customers by offering them everything a home buyer could dream of: guaranteed 24-hour loan approval, financial planning services, and even loans with no money down, according to Bloomberg News.

The lenders are banking on their new customers—who, by most objective standards, are already doing quite well for themselves—becoming the latest millionaires/billionaires when their companies go public or are perhaps acquired. In other words: They’re a good financial bet.

Certainly mustering up a down payment is no easy task for all but the uber-wealthy in the nation’s tech centers. For example, the median listing price in San Francisco is $1.2 million, according to realtor.com®. It’s even higher in some parts of nearby Silicon Valley, hitting $1.5 million in Cupertino, CA, and a staggering $2 million in Palo Alto, CA.

Those sky-high prices led San Francisco Federal Credit Union to step in. The credit union is offering buyers 100% financing for 30-year adjustable-rate mortgages on residences going for up to $2 million, according to Bloomberg.

But only about 60% of applicants receive one of these sounds-too-good-to-be-true loans—and those buyers have an average credit score of 747 and a $219,000 average income, the credit union’s Chief Lending Officer Rebecca Lytle told Bloomberg. So we’re not exactly talking about high-risk customers here.

Offering loans with no money down still makes some in the industry nervous, bringing back unpleasant flashbacks to the subprime mortgage crisis. The crash was predicated on 100% financed loans and lousy income verification, and plunged the nation, and much of the world, into a deep recession.

“People should have skin in the game,” says Don Frommeyer, CEO of the National Association of Mortgage Brokers, a Plano, TX–based trade organization. “If you don’t have anything invested in [your home], it’s so much easier to walk away.”

And there are signs that the tech industry may not remain quite so strong forever. Venture capital funding dropped 20% in the second quarter compared with the same time a year earlier, according to a PricewaterhouseCoopers and National Venture Capital Association report. In the first four months of the year, Bay Area layoffs in the tech industry were roughly double that during the same time last year, according to The San Francisco Business Times.

The local housing market has already begun to soften, most likely as a result, Palo Alto real estate agent Avi Urban, of Keller Williams, told realtor.com.

He’s seeing sellers price homes more modestly (and fairly) as fewer bids come in on abodes spanning the price point spectrum. Properties are also sitting on the market just a little bit longer, he says.

He’s not surprised that some buyers, potentially even some of his own, could be getting 100% financed loans. “Banks have relationships with heavy hitters,” he says.

The loans, though, still give many heart palpitations.

“Given what we went through in 2008, zero-down financing is suicidal for our country,” Chuck Green, CEO of mortgage brokerage Bay Area Capital Funding, told Bloomberg. “We have to learn from our mistakes.”

The post Looking for No-Money-Down Mortgages? Become a Silicon Valley Techie appeared first on Real Estate News and Advice – realtor.com.

Source: Real Estate News and Advice – realtor.com » Real Estate News