There’s a proposal afoot in Washington, D.C., to “reform” the Federal Housing Administration (FHA) by increasing the required minimum down payment from 3.5 percent up to 5 percent for all borrowers no matter how good their credit.
Why is that a bad idea?
FHA-insured loans are a safe and popular option for a growing number of today’s home buyers. A 3.5 percent down payment already requires them to make a significant, but attainable financial commitment.
Boosting the minimum down payment would do little to reduce the risk of mortgage default and would only push the dream of homeownership out of the reach of otherwise qualified buyers, National Association of REALTORS® (NAR) President Ron Phipps has said.
NAR estimates that it would take the average American family, living frugally and saving at the current national rate, nearly seven years to save up a 5 percent down payment on a $200,000 home. Bump up the down payment to 10 percent and the savings period stretches to 10 years.
REALTORS® also oppose proposals to lower the current FHA mortgage loan limits, which could reduce mortgage availability, according to NAR.
Homeownership is an important building block of the American economy and qualified buyers don’t need unnecessary obstacles hindering their dream.
Go to the FHA website to find tips on buying a home and information on how FHA can help.