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FHA Down Payment Assistance - Should It Be Saved?

There is a great conversation going on about a Friday, August 21, 2008 post over on the Blown Mortgage blog regarding seller funded down payment assistance programs. I encourage everyone to go and take a look at it before reading the rest of this column. The conversation is centered around a guest post by Josh Lewis entitled "RIP FHA Down Payment Assistance Programs, Not So Fast".

As I expected would occur on a blog which keeps a necessary sharp eye on the dirty underbelly of the mortgage business, most of the commenters disagree with Mr. Lewis' opinion that down payment assistance programs should be saved.

(Read the rest on my blog at FHA Loan Advice)

Posted by Carl Pruitt - http://FHALoanAdvice.com on 08/22/2008 11:39 PM

Comments (4)

fha down payment assistance

Post is included in group: The FHA Mortgage Group

4 Comments on FHA Down Payment Assistance - Should It Be Saved?

AUG

2008

Although there may be a time without them, I do not see them going away permanently if at all - last minute 'save' is always probable. I just do not see where they are used a lot. Some, yes, but not a lot.

AUG

2008

I have been lending for 22 years. The fundamental of lending is to verify the borrowers ability to pay. Does not matter the program does not matter the down be it zero or 50% the lender still must verify the borrowers ability to pay.

Today's so called credit crunch (speaking residential) simply resembles what was available 22 years ago without the exotic loans so it may "seem" things are tight (they are with JUMBO loans) but really we went back to basics and the basics mean good old fashioned underwriting. Verifying income, assets and the ability to pay. So how is it if we underwrite the file that utilizes the DPA with the FHA loan, the file has a higher propensity to default? What or where is the magic about a borrower paying the 3% down vs. the seller paying it...how does it make the loan better? So again, what happened to their ability to make the payment? Could it be regional unemployment, a disaster like Katrina what happened?

Visit my blogs to see my opinion on DPA's since I wish not to repeat myself but let me make one point. HUD says the default rate is higher and my question is what happened to their ability to pay? What are the numbers behind the numbers? HUD does not say.

Down payment assistance is not the enemy in fact as HUD, the FED, Treasury and all look for ways to prop up the housing market or look to stabilize your local neighborhoods why would you take the DPA away....an oxymoron wouldn't you agree?

Whether good or bad, I'll place my money on a the probably likelyhood of another extension of these types of funding programs -- if not at the very least, a return after discontinuing... the housing industry still needs the percieved "boost".. thanks for sharing the article!

I definately think taking away any DPA is a shame. Maybe add more restrictions if used, but don't eliminate the whole program. Many people can afford the payments, but not the down payments that are needed today. That's is just my opinion.

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