In the past year I have had three buyers getting FHA loans, use a down payment assistance program and I have been hearing for the past six months that it was on the chopping blocks!
Well today my mortgage broker called and told me they have been saved and will continue to be available to buyers. From what I understood, HUD's argument was that these loans had a better chance of default and were artificially inflating prices. I personally didn't think so! The reason I didn't think so was because if the house didn't appraise, you couldn't use it.
Now, my buyers who used the program had the 3% down for the down payment required by the FHA, but I thought it would be a better use of their money to save it as a rainy day fund incase they got in trouble. This would lesson any risk of having them go in to default on their home loans.
I understand the FHA and HUD's argument, but I think if they want to change the rules, make it so that people who do use down payment assistance have a reserve and make it a win-win for everyone involved. Most people live month to month and if they get in trouble they don't have anything to fall back on and this is a program that can help.
I understand wanting to have a higher PMI, if they use such a program, but we need to figure out a way to get lower income people and single parent households into the dream of home ownership, and these down payment assistance programs were great for doing just that!
So, thank you courts, for seeing the light and giving the down payment assistance programs a stay of execution.
Todd Clark - broker
Kastings & Associates