Although regulation of housing finance may change due to the recent election, low down payment programs will continue to be important in helping to reverse the multi-year decline in homeownership. At the moment, saving for a down payment is still the single greatest barrier preventing first-time buyers from becoming homeowners.
In September, first-time buyers accounted for 34% of sales, up from 31% in August and up from 29% a year earlier. An article from Down Payment Resource has taken a closer look at how the election may affect down payments.
For the first time in more than a decade, Republicans are in control of the White House, Senate and the house and increasing homeownership is top of the agenda for the new Congress and Administration. The new President-elect has promised to reduce regulations across the board and it’s likely that financial institutions will embrace this deregulatory approach. When it comes to housing finance, policymakers may focus on reducing risk. Programmes such as the FHA could see a major change. However, any changes will take some time to implement so it’s too early to tell the potential effect.
While incomes are up, so are median house prices. The article highlights the fact that the typical first-time buyer had a higher household income of $72,000 compared to $69,400 last year. This year first-time buyers were purchasing a slightly larger home at 1650 ft.² compared to 1620 ft.² in 2015. The price paid was $182,500 compared to 170,000 last year.
Student debt is still delaying more than half of first-time homebuyers from saving for a down payment, with 55% saying student loan debt had delayed them for saving for a home. Amongst repeat buyers, 6% reported that saving for a down payment was the trickiest task, with 49% reporting credit card debt delaying them in saving for a home. First-time buyers were far more likely to make sacrifices to save for a down payment compared to repeat buyers with single females and married couples making the most financial sacrifices.
Increasing demand to become homeowners isn’t increasing defect, fraud and misrepresentation risks. Apparently, the frequency of defects, misrepresentation, and fraudulence in the information submitted in mortgage loan applications decreased by 1.4% in September compared to August and had decreased by 14.8% compared to September last year.
One of the problems is that many people are unaware of down payment assistance; with a new national survey found that 71% of Americans are not aware that assistance is available for middle-class homebuyers. Some 77% of students had never heard of or were not familiar with loan counseling programs from non-profits.
To read the full report click here.