Home Buying Just Got Easier
New FHA Rule Helps Down Payment
Today, Fannie Mae and Freddie Mac both released a 97% loan to value mortgage product. That’s a fancy way of saying that you’ll need just 3% down to get an FHA loan vs. 3.5% as was previously needed.
This change is directly aimed at first time homebuyers who have been largely absent from the real estate market over the last 3 years or so. This is a very good thing but I hope they don’t get carried away with easing the qualification for mortgages.
If the market is slow, pricing needs to change to speed things up. Making loans easier to get, beyond just reducing the down payment requirement, isn’t the long term answer. The market will sort it out and find it’s own level.
We’ve been down the path of making mortgages too easy to get and the result wasn’t pretty.
With this change, the government is looking to prop up the housing market by making it easier to get the one segment of the population, millenials specifically, off the fence and into the market to buy a home. Millenials have been the segment of the market burdened with graduating college just as the economy collapsed thus making getting a good paying job very difficult.
Add “Obamacare” to that and the employment situation became more dire. The prediction for 2015 is that millenials will be back in the market.
More buyers in the market would certainly be a good thing. There aren’t a lot of homes on the market currently but as values increase I think that will change. Buying activity would help that, no question.
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