If regulators get their way, many qualified home buyers may be shut out of the market very soon. Home owners and sellers will see their property values take a hit, too: Fewer buyers mean lower home values.
Federal regulators have proposed a rule that would require most borrowers to come up with a 20% downpayment on a home purchase. Buyers with less than 20% to put down would have to choose between higher fees and rates — up to 3 percentage points more — compared with folks who have the 20% or a 16-year delay while they save up the necessary downpayment.
That’s how long it would take the typical American family to save enough money for a 20% downpayment and closing costs, according to estimates of 2010 median income and home prices from the NATIONAL ASSOCIATION OF REALTORS® and the 2010 national savings rate.
By the way, those 3 extra percentage points would amount to almost $500 a month for a $250,000 home.
Why do the feds want to mandate 20% down?
Regulators are trying to fix the root causes of the housing crisis, which we fully support. But the proposed Qualified Residential Mortgage (QRM) rule is the wrong solution. Strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay, not high downpayments, have the greatest impact on reducing lender risk.
Mortgage rate and downpayment should be based on someone’s overall creditworthiness: credit history, income, employment history, and existing debt. I, and many people I know, are only home owners today because we worked hard, paid our bills, built our credit quality — and got a 5% mortgage.
Hard-working, creditworthy American’s shouldn’t be shut out of the housing market or have their dream of home ownership deferred while they save for a needlessly high downpayment.
If you believe, as we do, that 20% is the wrong solution for fixing housing issues, join HouseLogic and NAR in telling the regulators no! Go to NAR’s Home Owner Action Center now and tell regulators to stop the 20% downpayment requirement.
What do you think about requiring 20% downpayments? How would that affect your ability to buy a home?