Return of 20% Home Down Payments Looms
BOSTON ( TheStreet) -- Hopeful homebuyers may soon need to shell out more money upfront before being approved for a mortgage.
The public comment period concludes Monday for potential mortgage-related provisions spawned by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Among the potential outcomes is that homebuyers could be required to front a higher down payment -- as much as 20% -- before they can legally qualify for a mortgage loan.
|Government regulators are cracking back into mortgage reforms that could create hurdles for buyers: a return to 20% down payments for homes.|
The proposed changes are being reviewed by federal regulators, among them the Treasury Department, Federal Reserve Board, Federal Deposit Insurance Corp., the SEC, the Federal Housing Finance Agency and Department of Housing and Urban Development. There is no set timeline for when final decisions will be made.
Many in the real estate sector have joined forces to fight such a change aimed at so-called Qualified Residential Mortgage loans, arguing that a 10% or 20% down payment mandate would deliver yet another damaging blow to the floundering housing market.In past decades, a 20% or more down payment was standard. The lower the down payment, according to conventional wisdom and ongoing research, the greater the risk of default. As housing prices soared and mortgage lenders dove head-first into what would be the subprime crisis, that common practice fell by the wayside. You may pay more in interest, closing costs or PMI, but just 5% down is enough for many banks and lenders. FHA loans, insured by the government, typically require only a 3.5% down payment.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV