The problem with Down Payment Assistance is that HUD does not like it. They blame DPA for creating bad loans that borrowers can’t repay or choose not to repay. There is a higher incidence of default when there is not an investment in the property by the buyer I don’t doubt that, however; it must not be completely valid because VA loans have always been $0 down and have always performed very well.
The solution is to allow $0 down FHA loans and then set up a plan that insures a higher level of success by making the buyer earn the ability to get the 100% loan. This is accomplished through mandatory education and proper discipline during a 6 month period prior to buying the home. That is correct the buyer who wants the 100% financing must earn the ability to get it, it is not a give away and everyone can’t get it.
If the potential buyer wants a 100% loan then they must complete a 6 months training course where they learn such things as budgeting, credit basics, why making their mortgage payment on time is not a choice. At the end of 6 months if they have paid all their bills on time, have taken on no more debt and are otherwise qualified they get to apply for the 100% loan. Credit score would not matter; past credit history does not matter as long as they are not in bankruptcy or had a foreclosure. Sorry this is not for those who have had a foreclosure in the past 3 years. This would also teach the attendees how to stay out of the path of predatory lenders and those sellers who will take advantage of them.
The buyer pays a little higher insurance premium to FHA to offset the additional risk and is encouraged to put together a down payment during the 6 months they are in the training. Buyers would flock to the program to just get the chance to buy a home and there would be a high level of success with the program. Only the people that were serious would go through the program, the folks who want something for nothing or think they are entitled would not apply.
A good plan, I think so, will it ever become reality, I doubt it.
Why tomorrow:
More to come
Lonny
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2 comments:
Completely agree. Borrowers need to take on responsibility for their actions. The idiots who take out mortgages they cannot afford need to be in apartments. Predatory lenders need to be in jail (after large fines). PW
Sounds good, would the buyer agree? No, would they do it? Yes.
I don't think they would like it, but it would help. And they would be Pissed if they didn't pass the course.
PG
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