Huntsville Alabama Houses Blog

Some FHA Officials Seek to Outlaw Down Payment Assistance

The news released yesterday is just another blow to potential home buyers. I read a report a few days ago stating more than 70 percent of people who could get a home loan last year no longer qualify. Did you get that? 70% of the home buyer market is gone. Lender restrictions on loans have become so tight, only those with wealth or good credit scores can now buy a home. No wonder the economy continues its steep decline.

In a further slap in the face to potential home owners, some FHA officials are making a move to ban down payments provided by sellers. In case you don't know, down payment assistant programs allow a seller to donate the down payment to a third party who then gives it to the buyer at the closing table. This wonderful program has helped many people own their own homes.

However, Brian Montgomery, the FHA Commissioner, says defaults on government loans where these programs were used are three times higher than those loans where the buyer paid his or her own down payment.

Personally, I've used the down payment assistance programs as a buyer many times and I've never foreclosed. I know many others like myself. I don't believe the problem is related to down payment assistance as much as it is standards and procedures. Most people simply don't have 20% to put down, and with fuel prices out of control and prices on everything else going up, people simply cannot afford to come up with $20,000 for a $100,000 home. And that's just the lower end.

Sure, there are still some 97% loans out there, but they are becoming harder and harder to find. As lenders continue to over compensate, it would be a blunder for the FHA to follow suit. Nearly everyone wants to live the American dream of home ownership and further regulation will only make it more difficult for the average American to own his or her own home.

Let's not go back to the days where the "nobles" owned all the property and leased it back to everyone else. Every American deserves the opportunity to own their own home and take the risks associated with it.