It seems that down payment assistance programs (DPA) create a genuine divide among real estate professionals. Some think they should be eliminated and others have seen value they bring to a buyer today. Hopefully everyone can agree that no seller has to accept an offer that contains the use of a DPA or any seller concessions. If a seller is uncomfortable with them then by all means advise them on other alternatives or wait for an offer from a more “qualified” buyer.
The press seem to be lumping together the use of legitimate DPA’s with the entire sub-prime mortgage mess. During the hot Northern Virginia real estate market between 2001-2005 most sellers flat out rejected any offer that asked for closing cost assistance. You had to fight tooth and nail to get a seller to even consider an FHA or VA loan as they were opposed to contributing the few hundred dollars in fees that those programs required in seller contribution.
There were some unscrupulous lenders and agents who were back-ending down payment assistance by manipulating offers and appraisals to be significantly higher than the asking price. They then requested the overage amount back under the table to fund the buyer’s down payment. These are not the down payment assistance programs we are talking about today. The buyer’s attempting to use those programs were not qualified to buy homes then and they wouldn’t be qualified to buy a home today. These programs were the result of an unregulated mortgage industry fueling by corporate greed and bad business practices.
Today’s buyers attempting to use DPA’s are a different set of buyers. They are buyers who qualify to buy a home. They are buyers who want to improve neighborhoods not make a fast buck and run. These are buyers who have jobs with verifiable income and have tax returns that can be checked. They have credit scores that make sense and a credit history that goes beyond a cell phone bill. What these buyers haven’t done in an economy with rising costs for everything from food to fuel is save a significant amount of cash to apply towards a down payment and closing costs.
So the politicians who sit on Capitol Hill have decided that these buyers, who sat on the sidelines during the sub-prime mortgage crisis, are the ones that should be punished by eliminating DPA programs. These are the first time buyers who are teachers, fire fighters, military men and women (who aren’t eligible for VA) and young professional who work hard everyday. Someone said to me recently “if they haven’t saved for a down payment then they shouldn’t own a home.” Apparently the idea that home ownership is the best way to build long term financial stability is only available for those who are able to live frugally on a teacher’s salary until they have socked away $20,000 to cover their down payment and closing costs.
Let’s be real. If a buyer can qualify for a 30 year fixed mortgage under today’s tighter lending standards, then providing them the means to have their down payment funded through legitimate DPA programs is the right thing to do. If the programs need more oversight to make sure that they are being utilized properly, then set the checks and balances in place. If the buyers who use these programs default on their loans in 3-5 years then make them accountable for repaying a portion of the assistance they received. Stop letting today’s homeowners walk away with no penality and start making them accountable for their actions.
Don’t lock today’s buyers out of the chance of homeownership because of mistakes made by the mortgage industry and unqualified buyers from five years ago. Give the buyers who want to help dig us out of the housing crisis a chance to become the responsible homeowners of the future.