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Down payment assistance will be eulogized no more. Solutions exist!

By
Services for Real Estate Pros with And the United States of America AZ SA543893000

I hereby declare that from the 21st of August, 2008, I will move on from down payment assistance.  Now, I'll focus not on bad-mouthing, I will focus on the solutions below...

 

capitol

Our politicians did what they did and come October 1st, things will be different.

Just like I would move on from a bad relationship - There's just no point in beating a dead horse.

Will things get bad? - If I let them.  But, no more complaining from me!!!  I'll let others complain while I help families buy and sell homes.

 

With home prices in more affordable ranges, solutions are attainable!

  • savingsFind people with savings accounts with a meager 10% of their annual earnings saved.  Believe it or not, there are people that do have savings.  They're just waiting for the right professional to educate them so they make the best use of their hard earned money.

 

  • Find people that put money into 401(k) accounts or IRA's.  Although you can get a loan on most 401(k)'s, even if you trigger a taxable event on the IRA, it may still be worth it.  After all, we're talking about a 3.5% down payment.

 

  • Find people that are currently renting.  These renters usually have security deposits that they will be getting back.  I'll just figure out what down payment is needed and subtract the deposit.  Now, the number they need is smaller and it may be within reach of taking down.

 

  • Educate parents on helping their children buy.  We always talk about working with people we like, right?  Let's find people that are helpful like us.  Surely, they would want to help their child buy their first home; especially in a GREAT BUYER'S MARKET!

 

  • Organize church savings pools.  A congregation can do fundraising events and take special collections to have members of their church purchase homes.

 

  • Wedding/graduation gift accounts.  These accounts allow family members and friends to contribute money to a designated bank account.  These monies are considered "sourced and seasoned" and can be used for down payment.

 

  • Employer contribution.  There have been times in the past where employers have paid the down payment for their employee.  This could be the result of the company wanting to retain a specific employee, it could be a bonus, it could be an annual raise bonus.

 

  • Teaching a budgeting class to those desiring to be home buyers.  So many families just need to trim away some of the fat and waste in order to buy a home.  The money has been there all along, they just didn't budget properly.

 

Some of these solutions to replace the down payment assistance programs will not yield immediate results but crying about the demise of DPA's will surely yield zero.

Let's continue to provide solutions to those that want to buy.  Our code of ethics states it is our responsibility to do so.

Posted by

Mark Organek

RE/MAX Excalibur

mark@monopolyman.com

www.monopolyman.com

Thank you for taking the time to read this post.  Hopefully one day we can interact or meet soon.

Comments (27)

Darin Haughie
Esslinger-Wooten-Maxwell, Inc. (EWM) - Pinecrest, FL

Things are going back to the old days when it was the American dream to own a house. Not like it has been the last couple years, 580 fico and here's a 100% loan. The party is surely over and all the agents that joined up to make a quick buck are moving on to the next quick buck. Great points in your blog, agents need to work harder these days just to make a living. America is in bad financial shape, check out I.O.U.S.A.com If you are tried of hearing other agents complain tell them what I do...McDonald's has several openings and you can start tomorrow!

Aug 21, 2008 10:33 PM
Doreen McPherson
Homesmart ~ Scottsdale ~ Tempe - Tempe, AZ
Phoenix Arizona Real Estate ~

You go Mark!  This is a great 'get over it and move on' post. 

RE 401k, back in the day, the one I was in, allowed a withdrawal for a down payment.  Don't know if that was unique to that plan or if they all have it.  But, it appeared to me that a first time buyer could use 401k dollars without a penalty.  I never pursued it because I wasn't a 1TB.  hmmm...

I like your wedding qift idea, too.  Look at how many people get married later and already have most of what they need.  As for cash, I'll let you know when I don't need any more.  LOL!

Aug 21, 2008 11:24 PM
Evelyn Panning
Property Connections Realty Inc. - Alturas, CA

A positive approach to a situation that changes how we do business - Thank you ~ Evelyn

Aug 21, 2008 11:37 PM
Patrick Randles
Nova Home Loans - Tucson, AZ

Good Post. I regularly have folks withdraw from a 401k for their down payment and usually, I am surprised at how quickly it all happens. What about bond and grant money?

Aug 22, 2008 01:57 AM
Mark Organek
And the United States of America - Mesa, AZ
It's not a game, it's your life.

Cameron - Optimism is going to be one of the necessary parts of our recovery plan and when it feels like an uphill battle to discuss saving money it comes in handy.

Darin - It's time for the industry to re-learn the basics.  Three to five percent isn't all that much to put together.

Aug 22, 2008 03:36 AM
Mark Organek
And the United States of America - Mesa, AZ
It's not a game, it's your life.

Billy - We're all going to have to know these or we won't be able to adequately perform our duties in educating the public.  Thanks for stopping by.

Doreen - That's funny!  The 401(k) bit doesn't usually require a first time home buyer situation so don't rule this out as an option for move-up/down buyers.

Evelyn - Thanks for recognizing the effort.  We have to get ready for change and do so quickly.

Aug 22, 2008 03:46 AM
Gene Allen
Fathom Realty - Cary, NC
Realty Consultant for Cary Real Estate

Lots of money out there but it is a problem getting people to want to use for houses.

Aug 22, 2008 03:49 AM
Doreen McPherson
Homesmart ~ Scottsdale ~ Tempe - Tempe, AZ
Phoenix Arizona Real Estate ~

What I was referring to is that they may be able to withdraw with out a penalty.  That may be better than borrowing in some cases.  But, I think it may require they be a true first time buyer.  Not totally sure. 

Aug 22, 2008 04:38 AM
Pam Simpson
Bob Leigh & Assoc., LLC - Senatobia, MS
GRI, Broker-Assoc.

Good way to focus on solutions.  We have a Bond Money program in our state for 1st time homebuyers.  It went out of fashion for a while, but I see it making a comback.  We also have 100% USDA Rural Development loans.  I recently had a 1st time homebuyer who used her IRA for downpayment.

Aug 22, 2008 07:37 AM
Lewis Poretz
Apex Home Loans - Annapolis, MD
Business Development Manager

Great advice Mark....  you can still buy a house FHA with no money down....   it just makes it a bit tougher... not sure what the difference is... maybe the Federal Government knows???   what really is the difference between getting 3% DPA from a non profit or getting 3% from mom and dad? No skin in the deal either way... I say give us 100% FHA and be done with it...

Aug 22, 2008 08:49 AM
Anonymous
Vicki

After checking out the Nehemiah website it seems there is still some hope if we can get together on this and make a choice to do something about the future and not just accept what ever the government tells us and work with it.  You can't expect the government to understand if you don't voice your opinion to them.

A bill introduced by Representatives Maxine Waters, Gary Miller, Al Green and Christopher Shays on July 31, 2008, that would reinstate SF-DPA. If passed and signed into law, the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 (H.R. 6694) will allow downpayment assistance to continue indefinitely.

Check it out for yourself.  http://www.dpagroundswell.org/

Aug 22, 2008 11:17 AM
#19
Mary Strang
Viroqua, WI

Down payment assistant is just inflationary to the final purchase of the home. That is because the buyers and sellers are adding it on top of the purchase price and the buyers are not getting any assistance at all. I think it is good to be no longer an option and that it will be painful for many, but better for the economy for buyers to save and make a commitment in saving before buying a home. They use to buyer a starter home first, then the mansion, remember!

Aug 22, 2008 11:39 AM
Richard Byron Smith, NMLS #184479
Mortgage Loan Officer, Fairway Independent Mortgage Corporation NMLS #2289 - Chattanooga, TN
Mortgage Loan Officer

Mary,

Not sure about adding the DPA on top of the purchase price. In Chattanooga the average sales price tends to be in the range of 5% less than the list price.

This includes those transactions with a DPA.

As far as the post DPA world, we did FHA loans pre DPA. Rural Development was a great option. It is even better now.

There were loans closed before 100% Flex.

However, the post DPA world will have fewer qualified buyers, and that will be deflationary. I do not think we yet understand how significant the impact of the loss of DPA will be.

I spoke with a representative from a US Senator's office. They signed the housing bill but did not know much about the many provisions in it. As far as DPA, they did not seem to know much about the program they banned. I think they will soon find out.

But with or without, we will move on.

Thanks,

Richard

Aug 22, 2008 01:21 PM
Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

Thanks, Mark. Those are some great ideas. The beauty of FHA loans is that there are so many ways to come up with the money. I expect they will stay strong for the next couple of years. Take care.

 

Paul

Aug 22, 2008 01:44 PM
Linda Le - Hawaii Loan Officer
Pacific Access Mortgage - Honolulu, HI

Mark, great post with sound advices! 

Aug 23, 2008 09:49 AM
Tinker Hulsey
Century 21 Wright-Pace Real Estate - Jonesboro, AR
Century 21 Wright-Pace Real Estate

Mark,

Great post!! I agree the good ole days are over. A down payment is a must now at least you have some vested intrest in the property you are buying.

     Tinker

Aug 24, 2008 09:53 AM
Mark Organek
And the United States of America - Mesa, AZ
It's not a game, it's your life.

Patrick - With every benefits provider computerized, it does happen pretty quick, sometimes within 5-7 days from call to check.  Great point bringing up grant and bond money!

Gene - People are buying, we just have to find all of the ones that will fall into an agent's lap and educate them for ourselves.

Doreen - Usually, you can't withdraw unless you quit or show hardship.  Different companies offer different ways to extract money.  When they borrow the money, they pay interest on the amount withdrawn but the interest is paid to themselves.

Pam - Yep!  There are many options to discuss and focus on.  Our energy should be spent on this and not on why things are tough.

Lewis - No kidding!  There is a slight difference between the two gifts even though there is no skin into the transaction.  If a parent gifted money to one of their kids to buy a home, the kid should be les apt to let it go knowing they will have to answer to the parents as to why they let the home go.  Although there isn't any skin from the kid there will be some accountability.  Great point about the 100% FHA.

Vicki - The tough part about the whole "revive DPA" movement is that the seller is not supposed to contribute to the buying party.  Gift program or not, at the end of the day, the money comes from the seller.  Exploring the 100% FHA possibility seems like a better option.  Still, if they bring it back quickly or temporarily, it would help the market.

Aug 24, 2008 04:58 PM
Mark Organek
And the United States of America - Mesa, AZ
It's not a game, it's your life.

Mary - It's true that it does get tacked on to the price of the home.  No matter how you look at it, if there was no need for DPA, would the buyer still pay the same amount?  Either way, we've got to teach the public the solutions that remain.

Richard - I believe it!  There were many that signed the bill that were clueless to not only what they signed but more importantly, why they signed it.  Too many politicians referred to DPA's as the cause of our current woes.  Now, let's focus on fixing the problems without congress' headache getting in the way.

Paul - Great choice of words when you said "beauty".  It is a very flexible program and there are plenty of opportunities to gather up the seed money needed to purchase the home.  At the end of the day, 3.5% isn't all that much to worry about.

Linda - Thank you, as always for stopping by!  I guess that I have to remember that 3.5% for your clients in HI represents quite a bit of money.  I shouldn't be so cavalier about how easy it is.

Tinker - It sure is and we need to start getting the public used to it.  It will be much easier than trying to pay bills with whines and complaints.

Aug 24, 2008 05:17 PM
Anonymous
Vicki

It may be an option, but it doesn't hurt to support a new bill that could help now.  I think that most people walking away from a home has more to do with a job loss, no savings to fall back on and interest rates that increased mortgages beyond what they could afford to pay.  I don't believe that people walk away from their homes because they have nothing invested, it's that they have nothing left to give. 

If we can't save DPA then so be it, but I can't just sit here and wait to see.  It took a couple of minutes of my time to go on the website in support of the program.  They already have 80,000 letters so far.  http://www.dpagroundswell.org/

Aug 26, 2008 06:57 AM
#27
Matt Hendrick
Southlake, TX

Well put - Vicky.  The term "old school" definitely summarizes the solutions.  One guy above got it wrong on the default ratio - it is 3 times higher than those FHA mortgages without DPA.  I can see where he got 33% (3 times / 1/3...) Anyway. the number of good loans that Have DPA is in the 90-95% range.

Here's 2 main reasons to get behind H.R. 6694:

1. FHA marketshare is reportedly over 50% right now, and according to FHA - DPA was involved in 40% of transactions.  So we are to rely on Bridal registries, and Church or Employer "gifts" to supplement the giant reduction in otherwise qualifies applicants (families).

2. It has nothing to do with performance - FHA's agenda was to implement a 100% program that, as of 8-28-08, doesn't exist.

So, my proposition is to do both...let's be positive and adapt when necessary, but let's also take the reigns when we have the opportunity to make a difference.  What can I say, I'm not the "grin and bear it" type of guy...

As always, I loooove FHA, but this could be huge - watch video from Ameridream www.HendrickTeam.com/SaveDPANow

Matt Hendrick - www.TexasFHAExpert.com

401K withdrawl is too expensive (always leave 401K's alone) - I like the budgeting class thing though -

Aug 28, 2008 09:51 AM