Will Home Buyers Be Forced Into Higher Down Payments?
If you have been trying to obtain approval for a home loan, one of the stopping points may have been your down payment. At present, lenders are looking for borrowers to start off their mortgage by having at least a ten percent down payment. That’s not all bad news – it also means you start your mortgage with a ten percent equity in the home, and your overall interest costs will be lower.
However, if legislators had their way, 10% would probably be the compulsory minimum for a borrower. I can see the sense in having bigger down payments, however, most home buyers struggle to raise the 4%-5% due to high rental costs (if renting) and the current cost of living. For many, buying a home will cost less than renting.
Inman News has an article related to the setting of high mandatory minimum down payments. One point is certainly well worth consideration – although our lawmakers probably won’t.
Mandating larger down payments would harm the economy, housing markets and middle class families
By setting high-ish minimum, down payments, many families will be driven out of the buying market. This will further suppress house prices until a breaking point is reached – a price where those same buyers can re-enter the market (lower prices = lower down payments). Lower prices have a flow effect throughout the economy. Sellers receive less for their properties, meaning they too have less to spend.
This is just one more indication that now may be a better time to buy than waiting 12-18 months. Higher insurance premiums, higher deposits, and most likely higher home prices are all going to be waiting for those who delay.
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