You may find that clients are increasingly taking on co-borrowers in the home buying process in order to help gain an edge, defray costs and shoulder the burden amid a housing market featuring relentless demand and tight inventory.
According to a report from real estate information provider Attom Data, during the second quarter, 22.8 percent of mortgage purchase applications involved a co-borrower, up from 21.3 percent in the prior quarter and 20.5 percent in the year earlier.
Agents should take the time to make themselves aware of the dozens of programs, and a few private companies, that act as co-borrower by offering down payment in return for a share of equity in the home.
Moreover, home buyers also are buying smaller but more expensive properties and doing it with lower rates and more money down.
Co-borrowing has become easier recently with the onset of home-equity sharing programs, such as San Francisco’s Downpayment Assistance Loan Program. Private companies assist buyers with their down payment in exchange for a share of equity.
According to Attom Data, 50.9 percent of home-purchase deals in San Jose involve co-borrowers; followed by 45.2 percent in Miami; 39.1 percent in Seattle; 31.1 percent in Los Angeles; 29.4 percent in San Diego; and 28.8 percent in Portland.
Memphis, Tenn., had the lowest share of co-borrowers in the second quarter, at just 10.3 percent.
Daren Blomquist, senior vice president at Attom Data Solutions, pointed out that buyers are “increasingly relying on co-borrowers to help with home purchases, particularly in high-priced markets where sizable down payments are necessary to compete.”
Matthew Gardner, chief economist at Windermere Real Estate, noted that climbing home prices “are forcing more and more borrowers to consider other options, such as leveraging a parent’s credit, in order to qualify to buy.”
“Given the ongoing concerns about the emergence of another housing bubble, it was encouraging to see that Seattle has the tenth highest average down payment in the U.S. at 14 percent,” Gardner said. “Such substantial down payments can act as a cushion in the unlikely event that home prices start to reverse the substantial gains that we’ve seen over the past several years.”