Thursday, March 11, 2010

FHA Debating Higher Down-Payment Requrement

The Washington Post has a story regarding the fact that FHA is debating increasing the minimum down-payment on FHA Loans (currently as low as 3.5%) as their cash reserves have shrunk due to increases in defaults in the past few years.

One of the lines that caught my attention was from the FHA:

The Federal Housing Administration has concluded that its loan volume would have dipped by 40 percent in the next fiscal year and that 300,000 first-time home buyers would have been shut out of the housing market if it had raised its down payment requirements...

Here are a few questions:
  • Would those homeowners truly have been "Shut Out" of the housing market... or would they have been "postponed out" of the housing market for now until they could save the additional amount for down payment?
  • Is being "postponed" a bad thing?  Is requiring a higher down payment (10% for borrowers with a FICO score below 580) truly a barrier to homeownership?
  • Should efforts be made to get people with 580 credit scores into homes now... or better preparing them (Home Buyer workshops, financial literacy, credit repair, etc.) for FUTURE homeownership?

Just some thoughts.

I love saying this... but Minnesota is UNIQUE.  Thanks to the efforts of the MN Home Ownership Center and our partners, we are the only State that has a complete matrix of available down payment and entry cost assistance programs.  The Center's Entry Cost Assistance Matrix is available here.

If you're thinking about purchasing your first home... and are wondering about down payment requirements or any of the other steps involved in becoming a SUCCESSFUL homeowner... visit the Center's website here.

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