Do you think the mortgage and real industry as a whole has been bad in the last 2 years? What about the last 6 months? Yes, people are still buying and I am busier this year than last year. Part of the reason is because some lenders are dropping the ball at the end and I am picking up the pieces. But this post is not about that. If you were shaking before, wait until a few months from now.
Down Payment Assistance Programs are now dead in the water....but maybe not. Read more....
The Senate’s decision to ban privately-funded downpayment assistance programs through the passage of its Housing Bill just happened a few days ago.
Why am I extremely disappointed? Again, government officials that don't know what is behind a mortgage, makes a decision that will affect thousands of families just this year alone.
Over the past 6 months, I have heard arguments from both sides of the fence. Even though I am in favor for the down payment assistance programs, and my thought process is very clear, I am outraged at those that badger this program with countless, misleading information, because they don't have a clear understanding on what this all means. Or have a clear understanding of what they are talking about or arguing about.
Here are some of the arguments from the nay sayers......
- The borrower is not putting any money down or into the transaction. There is no sweat equity in the transaction. It makes it easier for them to walk away from the home that they purchased. Sorry, but your thought process on this is the stupidest thing that I have ever heard in my life and I will explain down below.
- When you do one of these programs, you usually have to bump the price of the house to make it work. Yes, this is true. But again, I digress on those statements made by people that just like to argue. I will pick this apart below.
- If you can't save money to buy a home, you shouldn't be buying a home. I semi agree with this statement, but this one is easy to argue. I will debate this below.
Here is my rebuteal to the statements made above......
- Okay, the mandatory investment for a borrower on a FHA loan is 3% of the borrowers own money. Of that 3%, 2.25% is used for the down payment. You can either get this money from yourself, 100% gift from a family member, or from a non-profit organization such as Nehemiah, AmeriDream, and many others.
With that said, okay... 3%. Whoopie do dah. 3%? You are complaining that if they put this much money down, that they wouldn't walk away from their home? How about this hard cold fact. Do you realize that in the last 2 years, home values have come down in most major areas. A home that was $300,000 two years ago might be worth $250,000? And I am being polite here, because every area is different. Some homes lost even more equity. So, the claim to fame is that no money into the transaction, people have an easier time to leave. Okay, do you know that there are thousands of homeowners that also left their home after even putting 10% or 20% down, yet their property dropped below what they still owed. And it wasn't because they just decided one night to do this. It's called the ECONOMY. With a bad economy, people losing jobs or lesser income, deaths in the family, divorcees, etc, etc. Think about this and dissect it.
- Can you hear my laughter on this one. Yes, some people abused this program and this part of the down payment assistance programs. There was a builder in NC or sold several hundred condo units. The borrowers used the builders lender who was also involved with an appraiser, who over-appraised the property. The lender used high end FHA rates and the builder got back what he gave the buyers, because of the over-appraised homes. They have been under investigation since then. The typical lender and appraiser do not practice this kind of lending.
Let me put my opinion and understanding out there. It's illegal to appraise a home more than it's worth. In many cases, the money that is tacked onto the mortgage to cover the sellers gift portion, is because that home is truly worth what the end price is. In most cases, when you sell your home, you get anywhere from 94% to 96% respectively, depending on your house and your market area. And this is after you probably have reduced your home. To many people complaining on this issue, whom haven't walked through this process in their heads or on paper.
- Back in the day, when rates were 18%, I had to put 20% down. Okay, agreed. But back in the day, money was made and spent differently. Taxes were much lower. The cost of living was more reasonable across the United States. Now? Gas is much higher. Property taxes are much higher. Day care is much higher. Need I say more? Ask yourself, is it harder to save money than it was 5 years ago? Yes, some spend pay check to pay check. Some don't know the meaning of savings. But a lot of people are making ends meat, don't spend frivously, and are struggling. People can usually save $2,000 to $4,000, but they need help with the rest. Depending on what part of the country you live in, it can cost the average borrower $7,000 to $20,000 to buy a house. And this would be under FHA loans with the minimum investment, to include state stamp taxes, intangible taxes, and other costs that are past onto the seller, but passed onto the buyer.
Overall, this is going to hurt the economy more than it will help it. In my 16 year career, I have done a few thousand home buyers. I have know of 3 people in that time, that have gone into foreclosure. Things happen. In one case, the woman lost her son that was living with her and was on the mortgage. In another case, one of the family members lost their job.
My whole point to this.... If you are a very good loan officer working with an ethical lender, you still need to qualify these individuals just like the next one. If no fraud is involved, you approve them just like the rest, there is more than that meets the eye then.
One last thought.... HUD and the media has put out there that now 1/3 of all down payments assistance programs go into default or foreclosure. Not one person has been able to provide these numbers to me in writing. And these numbers in my opinion are construed. Some of this based on the bad lending practices of other lenders and loan officer. And don't forget, our current Economy.
For those that want to help and stop this, please click onto the link below. From what I know, this won't go into affect until August. But it still needs to go through one more vote. UPDATE : The proposed rule comment period ends on August 15, 2008.
To support the DPA programs, please go to www.supporthomeownership.com
and make your voice heard.
Please read for more information.... Nehemiah/AmeriDream Down Payment Assistance Programs (DPA's) - Are they that bad?
____________________________________________________________________________________
For more information on FHA loans, please go to this link. The FHA Expert
For more information on how you can obtain your dream home, please click here : Mortgage Financing Options
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!
Copyright © 2008 by Jeff Belonger
Comments(19)