Who’s doing it and why? As the housing market gets tougher, more borrowers are finding it pays to be creative
Home buyers are increasingly taking on co-borrowers to help gain an edge, defray costs and shoulder the burden in a housing market characterized by relentless demand and tight inventory.
A new report from real estate information provider Attom Data shows that in the second quarter, 22.8% of mortgage purchase applications involved a co-borrower, up from 21.3% in the prior quarter and 20.5% in the year earlier.
As MarketWatch has reported, there are 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.
Of course, there are plenty of other ways to enter into a co-borrowing situation, including simply by enlisting helpful family members.
The public records data Attom gathers don’t show ages or other demographic characteristics of buyers who are doing co-borrowing, let alone the types of arrangements they’ve made, but the data does offer some fascinating information about borrowers and the market.
Attom did a deeper dive through their records for MarketWatch and determined that home buyers with a co-borrower are buying smaller but more expensive properties – and doing it with lower interest rates and more money down, which allows them to avoid paying mortgage insurance.
“My takeaway is that co-borrowers are buying in higher-priced markets like Illinois, California, and Florida, but having to put more down to compete in those markets,” Attom Vice President Daren Blomquist said.
“The more money down along with a co-signer who may have better credit is helping these co-borrowers secure a lower interest rate, but the homes they are buying tend to be smaller, an indication these skew toward first time homebuyers,” he added.
The median down payment for first-time buyers across the nation, among all types of borrowers and properties, is 6%, while among all borrowers it’s 10%.