How Much Money For A Home Down Payment?
JLP from All Financial Matters wrote an article today titled Back to 20% Down on a House?. In this post JLP states that he thinks that it is a good thing that mortgage companies are requiring a 20% home down payment again. While I agree with JLP that Americans need to save more money, I don’t think that it will be good for Americans to need a 20% down payment to buy a house.
Over the last 10 years, house prices have skyrocketed. If the real estate mortgage companies now require a 20 percent down payment to buy a house, many families just starting out will have a lot of trouble buying their first house. Additionally, families who purchased houses in the last 10 years with less than 20% down, still won’t have 20% down to buy their next home.
Inadequate home equity might be a problem for real estate mortgage companies, but it is not what caused this housing problem. The problem was caused by home owners buying houses that were too expensive. To fix this problem you could require 20% home down payments, but I think that it is more prudent to make sure that homeowners can afford their home mortgage payments. That means giving out less credit, not requiring more equity.
I agree with JLP that we need to encourage people to save more money, but I don’t think that doing it through home real estate is the best way to help people save money. Owning a house that a family can afford is one of the best ways to get people to start saving money.
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