The housing market is still in a slump with no signs of recovery on the horizon. A recent FHA survey showed that mortgage applications were down a whopping 30.8% over the last nine months despite a slight rise of 7.8% during the month of June. Even with low interest rates potential homeowners are reluctant to buy and home values continue to decline across the country. With new requirements to secure a home mortgage on the horizon it looks like the housing market could still be far from a turn around.
The Dodd Frank Wall Street Reform And Consumer Protection Act of 2010 has proposed changes to mortgage funding criteria and soon home buyers could need as much as a 20% down payment to secure a conventional home loan with the best rates. While in the past this was the typical down payment needed to receive a mortgage, during the housing boom the standards changed leading to the housing market downfall.
While many in the industry do agree that changes need to happen, some worry that this might be too much for an already unstable housing market.
According to an article on the thestreet.com even the national association of realtors is speaking up and saying not so fast. Raising the down payment to 20% would be a burden that too many people simply would not be able to afford.
The National Association of Realtors said after looking at national saving rate data:
“it would take 9.5 years for the typical American family to save enough money for a 10% down payment and closing costs, and fully 16 years to save for a 20% down payment and closing costs.”
“A 10% or 20% down payment requirement for the QRM means that even the most creditworthy and diligent first-time homebuyer cannot qualify for the lowest rates and safest products in the market.”
If these changes were to go into affect the same article points out that the housing industry could be crippled even more. Millions of potential homebuyers could be shut out of the housing market altogether which could lead to even higher inventory and even further drops in home values.
In addition to the 20% down, other proposals with the legislation include limiting debt to 36%, not allowing a mortgage payment above 28% of gross income as well as keeping borrowers with delinquent accounts and other financial issues from qualifying for a home loan altogether.