January 25, 2004
PUTTING THE COMPASSION IN CONSERVATISM:
New loan program with no down payments (Kenneth Harney, January 25, 2004, San Francisco Chronicle)
What do you say to zero down on your first home purchase? And how about rolling your closing fees into the mortgage itself, giving you a home loan that costs you nothing out of pocket up front?That intriguing offer could become a standard, government-backed option for an estimated 150,000 or more first-time home buyers if Congress approves a new zero-down program to be proposed in President Bush's federal budget. No- down-payment mortgages could go as high as $290,000 in high-cost markets on the East and West coasts.
If sanctioned by Congress, the program will be run by the Federal Housing Administration, the nation's largest single source of mortgage money for first- time buyers.
FHA loans typically carry minimum down payments of 3 percent. The new program would essentially allow home buyers to come to the table with no cash whatsoever.
That is expected to open the door to a first home for thousands of families and singles who have sufficient incomes to pay monthly rents as high as mortgage payments, but who find it difficult to accumulate enough savings to handle a down payment and closing fees. If approved by Congress, the program would become a permanent addition to the FHA menu of mortgage options.
You not only help low income families, but in making them homeowners make them more conservative too, because more deeply invested in society.
Posted by Orrin Judd at January 25, 2004 11:11 AM
We could add a free SUV to the FHA menu to entice those who are still on the fence about supporting this great idea.
Posted by: John J. Coupal at January 25, 2004 2:22 PM"We could add a free SUV to the FHA menu to entice those who are still on the fence about supporting this great idea."
The new,improved conservatism.Tastes filling,less great.
No doubt Dems will complain the houses are too modest and offer more.
Howard Veit comments on this and I have to say I agree.
Posted by: M. at January 25, 2004 3:37 PMI would link the zero down loans to direct electronic transfers from the customer once the loan is approved, just to make sure the money gets to where it's supposed to go instead of some alternative expences.
Posted by: John at January 25, 2004 4:00 PMJohn:
Not free, but interest free. Given the deflation rate, car companies will already do so.
Posted by: oj at January 25, 2004 4:02 PMM - Howard Veit makes the assumption that these loans will go to deadbeats, single moms and other problem debtors who will default on the loans which will cause bigger problems for the government.
Just because there isn't a down payment doesn't mean these people have to pass income tests, credit tests, reference tests, etc. Yes there will be probably be more defaults than on normal loans but studies and history have shown the mortgage is the last debt people avoid paying.
I know plenty of people who are making 50K+, hold good jobs, and are paying over 1K a month in rent because they can't come up with the downpayment.
Sorry, should say "doesn't mean these people don't have to pass...
Posted by: AWW at January 25, 2004 11:52 PMMy wife and I would probably be prime candidates for these programs. We are just out of graduate school, young children at home, small but steady income, and plenty of student loan debt (though we have a good credit rating). But wouldn't these programs just serve to juice the housing market and drive up prices?
Perhaps I should have become a carpenter instead of going to graduate school.
Posted by: Jason Johnson at January 26, 2004 11:23 AMThink of home construction as manufacturing jobs that can't be outsourced.
Posted by: oj at January 26, 2004 11:30 AMAt times like this I can't believe OJ was against the New Deal and FDR.
Posted by: Chris Durnell at January 26, 2004 11:41 AMAlready been tried in my county, and it was a disaster for the buyers. Of course, the housing market here is weird, so I wouldn't extrapolate.
But if you buy real estate with no equity, you'd better hope for cheap credit, free coinage of silver, big deficits and a halt to export of low-skilled jobs overseas.
An unlikely quadifecta, if you ask me.
Posted by: Harry Eagar at January 27, 2004 2:19 PM