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Recently, some cities have issued risk warnings, and some real estate projects have violated regulations by launching "zero down payment" home purchase activities. The so-called "zero down payment" home purchase means that the home is purchased with a loan. Doing so may seem to reduce the pressure of buying a home, but in fact there are many hidden dangers, and the risks behind it need to be vigilant.

Regulatory policies explicitly prohibit "zero down payment" home purchases. The Ministry of Housing and Urban-Rural Development, the People's Bank of China, and the former China Banking Regulatory Commission jointly issued a notice in 2017, strictly prohibiting real estate developers and real estate intermediaries from illegally providing home purchase down payment financing; strictly prohibiting Internet financial institutions and microfinance companies from illegally providing "down payment loans" and other home purchase financing products or services; and strictly prohibiting the use of funds such as personal comprehensive consumer loans for home purchases.

"Zero down payment" home purchases carry hidden legal risks such as illegal operations and loan fraud. Under the premise of legality and compliance, banks cannot allow borrowers to buy homes with "zero down payment". Therefore, some real estate companies and intermediary agencies have come up with two "methods" that are suspected of being illegal and irregular. One is that the real estate company or intermediary agency first advances the down payment for the borrower; the other is to sign a yin-yang contract, or falsely raise the house price, thereby increasing the bank's loan amount and "loaning" the down payment. Since illegal and irregular operations cannot be agreed upon in the contract, they will not be protected by law. Once the real estate company fails to honor its promise, the buyer may "lose both the house and the money" and be suspected of loan fraud.

In addition, "zero down payment" home purchases will increase the debt burden of borrowers. The reason why some real estate companies and intermediary agencies promote "zero down payment" home purchases is precisely to target the pain point of some home buyers' short-term lack of funds. Little do they know that this operation, which seems to be able to alleviate financial difficulties, will actually increase the economic burden. The house price is overrated, and the borrower's loan amount is increased. Even if the loan can be successfully issued, the borrower's repayment amount will increase sharply. It seems that money is saved "in the front", but in fact it costs more "in the back".

At present, my country's real estate credit policy has been optimized for many rounds, and the down payment ratio has continued to decline. On May 17, the People's Bank of China and the State Financial Supervision and Administration Bureau issued the "Notice on Adjusting the Minimum Down Payment Ratio Policy for Personal Housing Loans", which adjusted the minimum down payment ratio for the first home from no less than 20% to no less than 15%, and the minimum down payment ratio for the second home from no less than 30% to no less than 25%, further lowering the threshold for home purchases.

The use of financial services to meet housing purchase needs should be done through legal and compliant channels. Homebuyers should consider their own specific circumstances, make overall considerations, and act within their means, and especially be wary of excessive leverage. (Author: Guo Ziyuan Source: Economic Daily)