As mortgage lenders rush to "learn from their mistakes," things could get rather tight for the average would-be homebuyer. In a classic case of over-reaction, many mortgage lenders are requiring much higher credit scores and even larger down payments. Bloomberg reports that some mortgage lenders are bringing back the 20% mortgage loan down payment:
With mortgage lenders requiring down payments of 20 percent, the average household, which puts away less than 1 percent of after-tax pay, will have to save 10 percent for 10 years to buy a home.
While I'm all for responsible mortgage lending practices, this is a bit ridiculous. We've spent almost two decades trying to make the American home more affordable for more people. Allowing a smaller down payment is one of those ways.
Instead of punishing hard working Americans with standards that may be beyond them, mortgage lenders should instead focus on:
- Verifying income.
- Credit scores that are at least above 680.
- Steering buyers toward loans that they can actually afford.
There are plenty of people with decent credit and incomes that allow them to make reasonable monthly mortgage payments. But they may only have enough for a 3% or 5% mortgage loan down payment. They should still be able to get mortgages.
Comment Preview