If it becomes law, a new bill introduced to Congress would increase the FHA loan down payment requirement for Temecula First Time Home Buyers and other first time home buyers across the country.
FHA down payment to increase for first time home buyers
A bill introduced in Congress Monday would increase the minimum down payment for Federal Housing Administration (FHA)-insured mortgages from 3.5% to 5%.
The FHA Taxpayer Protection Act of 2009 — HR 3706 — would also prohibit financing initial service charges, appraisals, inspections, or other fees or closing costs with any part of an FHA mortgage.
According to the bill’s author, Scott Garrett(R-NJ), “As we have learned repeatedly throughout the mortgage crisis, the amount of equity a homeowner has in their home directly correlates to the credit risk associated to their mortgage.”
Ah yes, the old “skin in the game”argument. On a $200,000 purchase a first time home buyer would need an additional $3000.
- If a first time home buyer and his family suffer a 50% drop in their income and cannot make their house payment, will the additional $3000 “skin” make a difference on whether they foreclose?
- What if their home should decrease in value 10%, will the extra “skin” keep a first time homeowner from foreclosing if they have to sell?
Scott and HUD Secretary Donovan want to decrease the credit risk to HUD, but if a first time homeowner suffers a “life event” that drastically reduces their ability to make their house payment, the amount of down payment is not going to keep them from foreclosing.
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Tags: fha loans, first time home buyer loans, First Time Home Buyers, temecula first time home buyer