Down Payment assistance programs

Last year they did away with down payment assistance programs.  Now they have a bill in Congress to bring it back.  Sure the down payment assistance programs helped people get into homes but they also helped fuel the mortgage mess.

Part of the problem was that is was coupled with no closing cost loans and stated income loans.  That made it a bigger problem.  People lied about their income (stated it falsely) to get bigger homes than they could afford and then they had no money invested into the home.  Many people in Wayne County and Oakland County bought homes that way.

If you have no money invested into a home you have nothing to lose.  Usually the bigger thedown payment into a home the less likely the homeowner is going to walk away.  People don’t like to give up money they have worked hard for.   So they will work harder to keep the house, to make the payments.   As opposed to the person who has no money invested they can just walk away and never lose a dime.  Nothing out of the pocket so who cares.  That is one of the problems with down payment assistance programs.

If they reinstate down payment assistance programs it should only be with 2 or 3 % cash reserves in the bank.  First time home buyers many times don’t realize how quickly a home repair can come.  Or how costly it is to get the furnace repaired.  Or a plumbing problem repaired.  It is all part of home ownership but if you don’t have any money to repair your Wayne County home then it falls apart.

I want people to buy Michigan homes but I want them to keep them too.  Your house is your nest egg.  History shows us that people who use down Down payment assistance programs are less likely to keep their Michigan homes.

But it is not up to me whether the down payment assistance bill passes.  If it passes I won’t pass moral judgement on people who use them.  I am not a “financial judge”.  It is up to every individual buyer to make a decision on what they can afford.  It is none of my business.

My quote of the day is:

Carl Sandburg
A baby is God’s opinion that the world should go on.

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