Don't Lock Today's Buyers Out of Homeownership by Eliminating Down Payment Assitance Programs

By
Real Estate Agent with Integrity Real Estate Group

Locking Today's Buyers out of a new homeIt seems that down payment assistance programs (DPA) create a genuine divide among real estate professionals.  Some think they should be eliminated and others have seen value they bring to a buyer today.   Hopefully everyone can agree that no seller has to accept an offer that contains the use of a DPA or any seller concessions.  If a seller is uncomfortable with them then by all means advise them on other alternatives or wait for an offer from a more "qualified" buyer.

The press and some agents seem to be lumping together the use of  legitimate DPA's with the whole sub-prime mortgage mess.  They are two totally separate issues and should be examined as such.  During the hot Northern Virginia real estate market between 2001-2005 most sellers flat out rejected any offer that asked for closing cost assistance.  You had to fight tooth and nail to get a seller to even consider an FHA or VA loan as they were opposed to contributing the few hundred dollars in fees that those programs required in seller contribution.  

There were some unscrupulous lenders and agents who were back-ending down payment assistance by manipulating offers and appraisals to be significantly higher than the asking price.  They then requested the overage amount back under the table to fund the buyer's down payment.  These are not the down payment assistance programs we are talking about today.  The buyer's attempting to use those programs were not qualified to buy homes then and they wouldn't be qualified to buy a home today.  These programs were the result of an unregulated mortgage industry fueling by corporate greed and bad business practices.

Today's buyers attempting to use DPA's are a different set of buyers.  They are buyers who qualify to buy a home.  They are buyers who want to improve neighborhoods not make a fast buck and run.  These are buyers who have jobs with verifiable income and  have tax returns that can be checked.  They have credit scores that make sense and a credit history that goes beyond a cell phone bill.  What these buyers haven't done in an economy with rising costs for everything from food to fuel is save a significant amount of cash to apply towards a down payment and closing costs.

So the politicians who sit on Capitol Hill have decided that these buyers, who sat on the sidelines during the sub-prime mortgage crisis, are the ones that should be punished by eliminating DPA programs.  These are the first time buyers who are teachers, fire fighters, military men and women (who aren't eligible for VA) and young professional who work hard everyday.   Someone said to me recently "if they haven't saved for a down payment then they shouldn't own a home."   Apparently the idea that home ownership is the best way to build long term financial stability is only available for those who are able to live frugally on a teacher's salary until they have socked away $20,000 to cover their down payment and closing costs.

Let's be real.  If a buyer can qualify for a 30 year fixed mortgage under today's tighter lending standards, then providing them the means to have their down payment funded through legitimate DPA programs is the right thing to do.  If the programs need more oversight to make sure that they are being utilized properly, then set the checks and balances in place.  If the buyers who use these programs default on their loans in 3-5 years then make them accountable for repaying a portion of the assistance they received.  Stop letting today's homeowners walk away with no penality and start making them accountable for their actions.

Don't lock today's buyers out of the chance of homeownership because of mistakes made by the mortgage industry and unqualified buyers from five years ago.   Give the buyers who want to help dig us out of the housing crisis a chance to become the responsible homeowners of the future.

Posted by

                                   Real People*Real Lives*Real Estate

If you are interested in learning more about the Northern Virginia Real Estate market including Alexandria, Arlington, Fairfax and Prince William Counties give Cindy Jones and Integrity Real Estate Group a call at 703-346-2213.

Military Relocation Specialist serving military families relocating to and from the Pentagon, Fort Belvoir, Quantico MCB and all of the Military District of Washington installations. 

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Check out www.varealestatetalk.com and www.cjrealtygroup.com for more information.

Integrity Real Estate Group
 
Real People*Real Life*Real Estate

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Rainer
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Dan Magstadt
Paramount Residential Mortgage Group, Inc - Lake City, FL

This is great information! It's definitely something I'll keep around for reference in the future!

DM

Sep 08, 2008 07:35 AM #1
Rainmaker
122,519
Ira Freireich
Best Buyer's Broker Realty - Valley Stream, NY
EBA

Cindy,

I thought that this type of financing had been eliminated, and lenders were opposed to its use.

Sep 08, 2008 07:38 AM #2
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Dan-there is going to be a lot more said and written about the DPA programs over the next few months.  The elimination of these programs will impact qualified first time homebuyers.

Sep 08, 2008 09:35 AM #3
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Ira-yes the programs are currently slated to be cut on October 31st.  Llenders have been qualifying buyers using these programs for the past year while the market was tanking. If there were strongly opposed to them then they could just say a buyer wasn't qualified if they didn't have money to go to the settlement table.

Sep 08, 2008 09:38 AM #4
Rainmaker
741,792
Ritu Desai
Samson Properties - Ashburn, VA
Virginia Realtor-Fairfax/Loudoun/PW-703-625-4949

I hope they extend the program it was a big help especially I had a single mon who bought a home and could not have done without the DP help. Her mortgage is close to the rental she was paying for a condo.

Sep 08, 2008 12:50 PM #5
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Ritu-this is a perfect example of how this program does help buyers who otherwise would be having to possibly wait for years before they could save for a downpayment.

Sep 09, 2008 12:50 AM #6
Anonymous
Ted Kunda- NW Area Manager -Nehemiah Corp.

Great blog Cindy!

Thank you for your support.  You made alot of good points as to why DPA needs to be available for the American public.  Too many good, hard working, people deserve a chance to own a home.  A $200K purchase in CA costs about $15,000 for down payment and closing costs.  Any trust me when I tell you that there are not may homes for this price that are in OK shape.  Most anything below $200K is either dilapidated or beyond easy repair.  Something that most homeowners cannot afford to repair. 

The DPA creates an equity position of 3% in the property to help the consumer with their investment over the long haul.  This is a much better opportunity than to have them borrower from their parents (who are already struggling from the economy), drain their 401K (now there is no retirement), or even depleat their checking and savings accounts.  Now if they get into trouble, they really wont have something to fall back on. 

There is no difference if a seller gives a credit for closing costs or downpayment.  This is the land of the free and a seller should be able to do what he wants with his property.  The more and more the government gets involved with our personal decisions the more I feel were are becoming a socialist society.  Every time we allow them to take what is ours, they will never be satisfied and will always ask for more regardless of the situation.

Thanks again for your support! 

Ted Kunda

Sep 09, 2008 04:44 AM #7
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Ted-thank you for stopping by and adding your experience and knowledge to my post.  The latest news seems positive that a deal will be struck to save the programs and put the guidelines in place to make sure that the buyers who use them will be exactly who we want to be buying homes in today's market.

Sep 09, 2008 11:28 AM #8
Rainer
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Judy Peterson
Berkshire Hathaway HomeServices Fox&Roach Realtors - Tredyffrin, PA
"Superb Service, Superb Results"

Cindy - You're right on target. 

Sep 09, 2008 12:10 PM #9
Rainmaker
290,032
LaNita Cates
REMAX of Joliet - Joliet, IL

Two of my closings this month are Nehemiah. These are both awesome couples who are tired of renting and just need some help to get in a house. I don't think they should be eliminated at all.

Sep 09, 2008 12:14 PM #10
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Judy-this is an issue that has been debated a lot over the last few months.  There are two sides to every argument and on this one I fall on the save the programs with accountablity side.

Sep 09, 2008 12:16 PM #11
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Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

Very well said and if I were you I would send this on to your congressman! I wrote a letter to our congressman here, looks like it didn't do any good as it still ended up on the chopping block, but I will continue to try to get it back as you are correct it helps so many!

Todd Clark, Helping Families Home - www.IFoundYourNewHome.com

Sep 15, 2008 05:10 AM #12
Rainmaker
102,205
Cat Zwicker, CRS
Desert Sky Real Estate, LLC - Redmond, OR
Down to Earth Service; Out of this World Results!

Cindy,

    GREAT Post!  I did forward it to my congressmen, who I think are sick of me! Jeff Belonger also had some good insight at the Town hall teleconference during the Republican Convention. I love that y'all are so passionate about DPA programs, as I believe they are the cornerstone of our housing market.  I found the following from the inside track at Nehemiah's website Get Downpayment.com  I've included the In-man News Link for the entire story below and I apologize if you are already on track!

"Chairman of the House Financial Services Committee, Barney Frank, has discussed publicly the fact that he has negotiated an agreement with HUD Secretary Steve Preston that will provide for the continuation of privately funded downpayment assistance..."    Read the entire article:

Sep 15, 2008 09:57 AM #13
Anonymous
Jovan

Saving DPA is one step closer to being a reality!  Join me TODAY in calling some congress people to let them know how important this bill is to the American people and our economy.  We have less than two weeks to make this our voices heard.  Here are 3 very influential congress people that can have an impact on our progress. 

Congressman Steny Hoyer of Maryland:      202-225-4131

Congressman Roy Blunt of Southwest Missouri:       202-225-6536

Congressman John Boehner of Ohio:         202-225-6205 

Let's make this happen!!!

Sep 17, 2008 06:28 AM #14
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