Mortgage Industry Trends

Down Payment Costs Keep Renters From Buying

Just-say-no-20-percent
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Just-say-no-20-percentI came across this brief article which caught my attention. You may have seen the headline: “Down Payment Costs Prevent Renters from Buying Homes: Zillow” (Down Payment).  I’m a little perplexed (which frankly is not all that uncommon).

According to Zillow, many renters say they cannot buy a home because of the large down payment required. The article gives examples throughout of the cost of a 20% down payment.

Based on this, it wouldn’t be a big leap to believe that others who may be living at home may have the same perceptions about the need for this huge down payment. Too bad they haven’t heard of FHA loans, requiring only a 3.5%, or the low down payment conventional loan options at 5% or even 3% down? These could reduce their required down payment funds by more than 80%.  Using their example of the down payment required on a medium priced home in the U.S., an FHA loan would reduce the down payment requirement by about $30,000. No small chunk of change.

So, how does the “20% down payment requirement” myth survive? Why isn’t the message getting out to the consumers that it just ain’t true? Obviously the Real Estate industry, the Banks, Credit Unions and the Independent Mortgage Lenders have not done a very good job of making the potential home buying public aware of all the low down payment options available for home financing. If they had, we wouldn’t have Zillow reporting such things. Instead, we might just see the reporting of increased home sales and mortgage financing, helping to bolster the economy.

Maybe NAR, MBA, the Credit Unions and all the Banking Associations should partner with CFPB to present a new and improved ad campaign to help consumers become aware of all the options open to them to finance a home. Coupled with that, it can be an expanded education campaign to help consumers fully understand the home buying and the home financing process and, as importantly, the responsibilities of being a homeowner. Unfortunately, whatever has been done to date on this front seems not to be working.

This will help consumers better understand their opportunities and options while increasing business opportunities for Realtors and lenders alike, as well for all related providers.

The proverbial win, win, win (if here is such a thing). With these opportunities, come the responsibilities to treat the consumers fairly, educate them on the process, and to provide them with, and approve them for, homes and loans they can afford and maintain long into the future. Quality homes with quality loans. That will help get things moving again.

So tell me then, why do people still believe they need  a 20% down payment?

Michael Vitali

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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Michael Vitali

About Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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