This post is being written in response to a post that I read in which the author felt that the NAR should not fight the proposed 20% down rule in the QRM.
For starters, people need to understand what got the housing industry in trouble, and be sure to pass out the blame where it deserves to be passed out. To begin with, the amount down payment has shown to have little to do with whether the mortgage gets repaid or not. For example, USDA and VA loans are ones which don't require a downpayment by the buyer, yet they are no more frequently defaulted on than conventional mortgages.
Why do homes get foreclosed? The simple answer is that they do so when the home owner cannot afford to repay the mortgage. In many cases, someone bought using an ARM(Adjustible Rate Mortgage), and after the mortgage rate increased, and in many cases doubled, the owner could no longer make the payments. In other cases, the person responsible for paying the mortgage lost the home after job loss, divorce, or a major expense like medical bills. In those 3 examples, the mortgage was unlikely to get paid whether they had put down 20% or not.
I've heard some people argue that maybe we should require higher downpayments on homes above the median home price in the area, so as not to penalize 1st time home buyers. While that may help in some cases, what about the doctor who just graduated medical school? I have sold homes to doctors without a downpayment, and I am yet to see one of them default on their mortgage.
The conclusion I have drawn on this issue can be summed up in very simple terms. It's not about the downpayment - it's about the ability to repay the mortgage!
If you are interested in receiving personalized service from a Fort Wayne Realtor who puts you first, give me a call, or send me an email. I am always there for both new and previous clients, both before and after the sale.
Darren Schortgen, Broker-Owner/REALTOR
Advanced Realty of Fort Wayne