"When they're more confident they are willing to stretch a little further," said Mike Graff, a mortgage consultant with Prosperity Home Mortgage. "I think that some people realize, look, they're not going to be in this house for 30 years, so moving to an ARM, when the rate is fixed for a period of time, they're definitely more comfortable with something like that to lower their payment or to kind of stretch their budget a bit, so we have seen an uptick in that."
Borrowers also have more options for low down payment loans, options that were not available as recently as just a few years ago. Fannie Mae reintroduced a 3 percent down payment loan that it had discontinued during the recession, and some private lenders are venturing back into subprime, although they're calling them "nonprime" loans. These are mortgages to borrowers with lower credit scores.
Higher debt-to-income ratios
After holding steady for two years, the share of conventional loans backed by Fannie Mae with down payments of less than 10 percent rose from 12 percent to 14 percent in 2017. The expectation is that it will be even higher this year.
"Availability of some low-down-payment loans is really much more widespread than previously, you're seeing things like debt-to-income ratios increase," said Mike Fratantoni, chief economist at the Mortgage Bankers Association.
Underwriting, he adds, however, is still quite conservative.
"Not the products that really led to big payment shocks in the last crisis," Fratantoni said.
Banks are also willing to take on more risk in the jumbo loan space. They hold these loans on their balance sheets.
"You could always put a low down payment on lower-priced homes, but once you start getting into that five, six, seven, eight hundred thousand-dollar price range, it typically was 20 percent, whereas now you can do 5 percent, so we are seeing that absolutely, especially within the past year, that has spiked up," said Prosperity Home Mortgage's Graff.
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