No Down Payment Mortgages in California Lead to Concerns

While some first-time home buyers in California are staying out of the market, others are wading into dangerous financial waters.

The source? An increased number of people who have received approal on no money down mortgages.

According to a report from the California Association of Realtors, more than 21 percent of buyers last year took out mortgages with no down payment. As a result, red flags are sprining up across the state.

Those within the real estate industry are worried because the report suggests that buyers are going deeper in debt, just as the Bay Area housing market is cooling down; the number of homes sold in the region dropped 19 percent last year compared with 2005.

Legislators are considering tighter restrictions on bad credit mortgages, such as no down payment and variable interest products. They contribute to the onslaught of buyers that are taking out more debt just as foreclosure rates are rising.

In order for the state to remain Golden in more than just name, changes will have to be made in order to ensure fiscal well-being for all current and potenail buyers.