Homebuyers are double dipping on available federal- and state-run mortgage finance programs, in some cases buying a home with a mortgage that requires virtually no down payment.

According to a research note published this week by Credit Suisse, first-time homebuyers are capitalizing on ultra-low mortgage rates. Analysts who recently visited multiple new home communities found “sharply diverging trends at different price points.”

Despite an uptick in new home cancellations in mid- to higher-priced homes, “At the low end, we saw buyers taking advantage of the strong affordability, proceeding with the purchase,” lead analyst Daniel Oppenheim wrote. “In most cases, this decision was based on the affordability vs. renting.”

The analysts observed several examples of buyers combining a Federal Housing Administration-insured mortgage with the California Homebuyer's Downpayment Assistance Program, which enables a buyer to purchase a home with the greater amount of $1,000 or 1% of the purchase price.

“We're fully supportive of efforts to encourage homeownership, but we wonder if programs to allow down payments of just 1% are actually helpful to either the borrower (the homebuyer) or the lender,” Oppenheim wrote. “In many cases, owning is less expensive than renting on a monthly basis, but looking just at the monthly payment does not give adequate consideration to the risks involved with owning rather than renting.”

Their main concern, he said, is that in a scenario with job losses and dropping home prices, many of these buyers would probably have a hard time with their mortgages.

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