About Real Estate: ‘No-down-payment’ mortgages making a comeback

Q. A couple of banks in our area are advertising no-down-payment loans. Weren’t those kinds of mortgages outlawed after the real estate and banking industry crashed several years ago?

A. Some in Congress wanted to ban such loans in the wake of the massive taxpayer-funded bailouts that began in 2008, but it was a wish that their elected colleagues refused to grant. Many lenders voluntarily quit making them, though, as the economy worsened and home prices continued to drop.

No-down-payment loans traditionally have been risky. A key reason is that because the lender would finance the entire purchase price, many borrowers would simply stop making their payments on the loan and let the bank foreclose if their home’s value dropped below the amount that they paid. That’s exactly what happened in the late 1980s and early 1990s, when rates on adjustable-rate mortgages soared, and again when values began to plummet in 2007.

Now the loans are making a comeback, but it’s doubtful that most homebuyers will be able to get one.

Most of the small but growing number of financial institutions that are offering the new generation of no-money-down mortgages will make them only to rich people. And, to increase the safety of the loans, many are also demanding that the applicant also put up a second piece of collateral in addition to their home — a portion of a huge stock portfolio, a vacation property or even a yacht — that may eventually be sold to cover the bank’s losses if the home loan goes into default and the foreclosure proceeds aren’t enough to repay the outstanding balance of the mortgage.

You might be able to get a no-down-payment mortgage if you are making tons of money, have lots of stocks or bonds, own some other valuable real estate or perhaps have a Rembrandt socked away in your closet. But if you’re like most of the rest of us, figure on making a minimum 5 percent to 20 percent down payment the next time you go shopping for a house.

 

Q. I was fascinated by the videos of that meteor that crashed into a town in Russia on Feb. 15. If it happened here, would the damage be covered by a homeowner’s insurance policy?

A. Yes. Damages, losses and injuries caused by objects that fall from the sky are covered by most standard homeowners and renters insurance policies, said a spokeswoman for the nonprofit Insurance Information Institute (www.iii.org) in New York. That includes meteors, asteroids, satellites and space debris.

The coverage also extends to damage or injuries caused by ice or other junk that occasionally falls from airplanes.

 

Q. We signed a one-year lease for our house in November. Last week, the owner sent us a certified letter that states that he is selling the house and demands that we must vacate the premises within 30 days or he will evict us. We have not been late in our rental payments. Can he legally evict us, just because he has decided to sell the property? If not, can the new owner raise our rent?

A. You probably don’t need to worry about leaving your rental house or seeing a rent increase until your one-year lease expires this fall.

Nearly every city, county and state across the nation prevents reliable tenants like you from being kicked out of their home simply because the landlord decides to sell. Most also require the new landlord to honor the terms of any existing leases signed by a previous owner, provided that the tenant has made (and continues to make) the rental payments in a timely fashion and adheres to all other terms of the rental agreement.

Of course, if you stop making your rental payments or break other terms of the lease, the owner can evict you in a matter of days and then sue for any back rent you would owe and any damages that might be caused while living there or moving out. Call your local rent board or similar agency to discuss your personal situation.

 

REAL ESTATE TRIVIA

One of the nation’s largest land owners, Motel 6 was founded in 1962 and quickly grew in popularity because it initially offered truckers and tourists a room for just $6 a night.

 

Send questions to David Myers, P.O. Box 4405, Culver City, CA 90231-2960, and we’ll try to respond in a future column.