While it may not be an “absolute rule,” it is generally not considered wise to take part in investments that call for “nothing down” but promise big rewards. You know the adage: If it sounds too good to be true, it probably is.
Well, one of the “investments” lots of Americans made over the past few years was the purchase of a home with little or no money down. That “easy credit” was often coupled with adjustable-rate mortgages whose interest rates soon “adjusted” up. Many who thought they were getting a great deal on a house soon found out it was no deal at all. The rising interest rates meant they could no longer afford their monthly mortgage payments, and all too many soon lost their homes to foreclosure.
Sadly, the bad news is not over. Many more are still struggling to make their payments, and a job loss or a sudden, large bill they were not expecting may force them into foreclosure. About 1 million homes are expected to be lost to foreclosure this year alone!
And yet the federal government, which pressured banks to make loans to people with poor credit, appears to be on the path toward encouraging irresponsible lending again.
The government-sponsored lending giant Fannie Mae “is creeping back into the market for mortgages with no down payment,” The New York Times reported recently.