Pink Houses
This week’s “pop” hit is the October 1983 “Pink Houses” by John Cougar Mellencamp. It appears that both sides of the Presidential Race are looking for ways to improve homeownership for first-time homebuyers. This is becoming a more serious problem as prices rise so that even when they can “afford it” from an income point, they do not have the money for a down payment, closing costs, escrows, and agent commissions. The Democrats have brought up possibly giving a $25K down payment “grant,” which will most likely be funded by taxpayer dollars, and if you read the fine print, it does not apply to the first-timers if their parents owned a home. I like the idea of helping them with the toughest part, for most of them are buying a new home, but I am not a fan of the rest of us paying for it.
However, it is not too far from what I would propose. The biggest issue is down payments and/or the lack thereof. We have VA loans, no down payment. FHA loans with a 3.5% down payment and conventional loans ranging from 3% down and up. Why would the Federal Government, HUD, VA, FNMA, and FHLMC not simply change their guidelines to no down payment for first-time homebuyers and no income restrictions, which is another killer for first-timers who make too much money to qualify for FHLB, Georgia Dream assistance, and or other down payment assistance programs? VA already does that and has delinquencies slightly higher than FNMA/FHLMC loans, and those are 100% deals for the most part.
FHA delinquencies are higher, but they also allow debt-to-income ratios over 50% in many cases, which is interesting, to say the least. If FHA moved to 100% deals but lowered their max debt-to-income ratios to somewhere at or below 50%, that may also level the playing field. Do these quasi-governmental agencies believe that someone putting down $21K on a $600K house will make them more likely not to default? Seriously, I could argue that our first-timer with $21K in their pocket after closing is a much better risk, but why should we let common sense get in the way? These programs already exist and would only take a change in the downpayment requirement (other than VA), and we are off and running. Let’s see, first-time home buyers making over $150K per year, have over 740 credit scores and reasonable debt, and now can afford a home in the $400K to $600K range, which they can’t for many reasons today, mostly because they don’t have the $$$ for a downpayment. They can make the payments. The average age of first-time homebuyers is now in their mid-30s range, which is not because they can’t afford the payments.
Remember… the BEST RATE is a LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Thursday, August 22, 2024
