Years ago, you didn't even think about buying a house until you could make a down payment of at least 20 percent of the purchase price.

Today, more people than ever are buying dwellings with little or no money down. Some are even financing the closing costs in addition to the price of the property. Because closing costs can be several thousand dollars, some borrowers have loans for more than the value of their homes.

"Today it's more the exception than the rule that people put 20 percent down," said Clay Mitman of The Prudential, Paul Ford Realtors in Easton.

The upside of this financing trend is that more people than ever have been able to buy residence and that nationwide, as well as locally, home ownership rates are higher than they have ever been.

"I think it's a good trend because we're getting more people into homes than we could five years ago," said Loren Keim of Century 21 Keim Realtors in Allentown, who sold more than 130 properties last year.

Low down-payment loans are "getting more families to reach their dream," agreed Scott Fainor. Fainor is president of the Lehigh Valley and Northeastern Pennsylvania region of First Union National Bank, which has loan programs that allow people to buy homes with as little as $500 in cash.

Others, however, are beginning to wonder whether there's a downside to people investing little, if any, of their own money to buy. . People who don't put a substantial down payment on the property really have little to lose if they can't make their mortgage payments, and so they could more easily walk away from the deal, some fear.

Brian Carey is an economist for the Mortgage Bankers Association of America, a real estate finance trade organization in Washington, D.C., Some economists are predicting that the booming U.S. economy will begin to slow this year, he said. When that happens, what will happen to these low down-payment loans? Will a slowdown in the economy affect the delinquency and foreclosure rates? Good questions, he said.

Carey said he has not yet heard any significant worrying, nor has he seen any performance statistics that would suggest trouble is brewing. In fact, a just released Mortgage Bankers Association survey found that the percentage of mortgage delinquencies continued down in 1999, and at 4.10 percent was the lowest it had been since it dropped to 3.92 percent in 1995.

Still, Carey said, low down payment and loans with closing costs that exceed the value of the property are relatively new products and the jury is still out on whether they will come back to haunt lenders. "We've really not seen enough time pass to compile enough evidence" on these loans, Carey said.

Meanwhile, the U.S. Department of Housing and Urban Development is trying to put the brakes on nonprofit programs such as Nehemiah, started by a Baptist minister in California in 1994, that help low-income people buy dwellings by providing some of the closing costs. "HUD is panicked over the fact that if they allow more people to take advantage of these programs, they're going to be seeing more foreclosures in the future," Keim said. The National Association of Realtors is fighting hard to keep such programs, he added.

Low down-payment loans really started to grow in popularity in the mid-'90s, according to Carey. In 1990, only 8 percent of home loans were made with down payments of less than 10 percent. "1994 was when we started to see a big move up," he said. "It went to 25 percent of loans made with down payments of less than 10 percent."

1995 was a record year, too; 27 percent of loans were made with less than 10 percent down. But it's been averaging around 25 percent since, Carey said. Another 20 percent are made with down payments of between 10 and 19 percent.

Carey attributed the increase in high loan-to-value loans to a number of new products that were introduced in the mid-'90s at the urging of the Clinton administration and housing industry groups to encourage home ownership.

The down payment has always been the biggest obstacle to ownership, he said. A number of low- or zero-down payment programs were purposely designed to help people overcome that obstacle.

Keim said another reason low- and zero-down programs are increasingly popular is that society's attitude toward borrowing has changed. Years ago, people would borrow money only if it were a last resort. Today, he said, credit is so easy to obtain that "people are used to not having a whole lot of money in the bank," and think nothing of borrowing to get what they want -- and to get it sooner rather than later.

While many of the low or little down programs were started to encourage home ownership among low- and moderate-income families, the programs have been extended to higher income families as well.

Clay Mitman, of The Prudential, said he wasn't surprised in January when fliers for two new low-down mortgage programs crossed his desk. The programs, from Sovereign Bank, based in Wyomissing, and GMAC Mortgage, offer up to 103 percent financing for loans of up to $252,000 and $325,000, respectively.

Lee Phillips, a loan officer in Sovereign's Easton branch, said its new program is geared to people who have "promising careers." They have the income to meet monthly mortgage payments on loans up to $252,000 but for some reason may not have been able to save for a down payment.

Such borrowers must have excellent -- not just good -- credit records to qualify for the adjustable loan, now around 8.25 percent, Phillips said. "But people with high credit ratings generally don't over extend themselves," he said. Mitman said he can see where the lenders are coming from: "They're trying to attract people who have excellent incomes but they don't save a dime. This creates a forced savings for them."

Steve Stelzman, regional vice president of residential lending at First Union, said he would be leery of low or zero-down loan programs for high-income borrowers. "If you target someone who has the ability to put 20 percent down and chooses not to, that's a whole different type of financing, and I think it brings with it more risk," he said.

Still Stelzman, as well as other area lenders and Realtors, believes that low and zero-down programs for low- and moderate-income families are working well. They say any fears about their increasing foreclosures are unfounded.

Stelzman said First Union has been offering zero-down and low down-payment loans for two years. The number of defaults among borrowers in those programs "are no greater or no less than those in more traditional programs," he said. The loans are successful, he said, because borrowers who take advantage of First Union's low- or zero-down programs are required to complete counseling on budgeting and other homeownership issues. "What we're trying to do is prepare the customer for costs associated with homeownership so they're not surprised," Stelzman said.

Borrowers who put less than 20 percent down are required to buy mortgage insurance, which would cover the loan if they default. Most real estate experts agree that if something were to happen, and large numbers of borrowers were to start to default on their zero- or low-down payment loans, it's the insurers who would suffer the most.

"Really, if the property decreases in value and there's no equity to cover it, the only ones who are hurt are the mortgage insurance companies," Keim said.

Another reason Realtors and lenders say they're not concerned about low- or moderate-income borrowers overextending themselves with low or zero-down loans is that homes continue to appreciate in value. They're not appreciating as quickly as they did in the late '80s, but they are still increasing, Mitman said. Stelzman said properties in the Lehigh Valley have appreciated about 4 to 7 percent a year for the last several years. That increase in value helps the borrower who buys a house with little or no money down and borrows closing costs to build some equity within a few years, he said.

People who buy with little or no money down really can't sell within a year or two because with closing costs and Realtor fees, they'd likely owe more than they could get for the home at that point, Stelzman said. But, he said, most people taking advantage of such programs to buy residences in Easton, Bethlehem and Allentown are staying. They're not looking to use the equity they have in the homes to move-up quickly, if at all, he said.

Also, Realtors and lenders said, favorable mortgage rates, which have been around 8 percent for 30-year fixed loans much of last year, helped more people buy dwellings as much as the little-down loan programs have. However, they said, if interest rates rise -- and many economists are predicting they will -- buying may begin to slow some regardless of how little a down payment borrowers need.

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