November 18, 2016
TheStreet.com quoted me in Home Loan Down Payments Are in Decline: Will Uncle Sam Ride to the Rescue? It opens,
President-elect Donald Trump has enough problems on his hands as his administration takes shape, with the economy, health care, geopolitical strife and a divided country all on his plate.
“U.S. homebuyers are putting less down to purchase homes due to the wide availability of low- and no-down payment loans such as FHA loans, Fannie Mae’s HomeReady program, a resurgence of ‘piggy-back mortgages’ and other programs,” says Erin Sheckler, president of NexTitle, a full-service title and escrow company located in Belleview, Wash. “Meanwhile, USDA and VA loans also do not require any down payment whatsoever.”
Sheckler also notes that lending requirements have begun to ease nationwide, thus giving homebuyers more wiggle room with home down payments. “According to Ellie Mae’s Origination Insight Report, in August, home buyer down payments varied by loan program but, in nearly all cases, down-payments were near minimums,” says Sheckler.
Sheckler also doesn’t expect the low down payment trend to end anytime soon.
“How much money a person decides to put down on the purchase of a new home is a combination of risk and personal tolerance as well as the loan programs available to them,” she says. “As long as mortgage guidelines remain relaxed and with first-time homebuyers being an increasing segment of the market, we will likely see down-payments hover around the minimums into the near-term future.”
The risk with lower home down payments is real, however. “No one wants to find themselves house-poor,” Sheckler adds. “Being house-poor means that the majority of your wealth and monthly income is tied up in your residence. This can be a catastrophic situation if you find yourself suddenly faced with a loss of income or unexpected expenses.”
Homebuyers looking for more help from Uncle Sam, though, may come away disappointed in the next four years. “While Trump has been pretty silent on the housing market, (vice president-elect Mike) Pence and the Republican party platform have made it clear that they want to reduce the federal government’s footprint in the housing market,” says David Reiss, professor of law at Brooklyn Law School. “This is likely to mean fewer low down payment loan options being offered by Fannie Mae, Freddie Mac and the FHA.”| Permalink