Orlando Real Estate

Mortgage Bailout and Downpayment Assistance

July 24th, 2008 4:30 PM by David W. Welch

The mortgage bailout looks like it is going to sail through congress now that President Bush has withdrawn his objection to the $3.9 billion set aside to help the neighborhoods effected the most by foreclosures. I can't say that I like all the aspects of this bill. As it stands right now there is give and take that helps home buyers then makes it tougher for them too. There is a proposed tax credit for first time buyers of $7,500 if they purchase before July of next year. That is the give. The take is the higher FHA downpayment requirement of 3.5% compared to the current 3%. There is another takeaway though. This bill will also do away with seller funded downpayment assistance.

I have written my Senators (Bill Nelson and Mel Martinez both are neighbors of mine) about this particular provision. The argument is that buyers that get seller funded downpayment assistance are more likely to default and pay a higher price. The bill does not eliminate all downpayment assistance, just seller funded programs. The seller funded programs have been unpopular with FHA since they began eleven years ago, and they are taking this opportunity to wipe them out purely for political reasons. Buyers need all the help they can get to purchase now, and many if not most sellers would gladly entertain providing downpayment assistance to effect a sale. With a national median price around $215,000 the 3% seller funded downpayment would come to $6,450. Rather than eliminating the seller funded option and providing a credit, these options should be expanded and promoted.

I do appreciate the effort, but I would rather see the seller funded downpayment assistance left alone. Buyers need the credit at closing not next year when they file their tax return.

www.DavidWelch.com, www.RealEstateOptimist.com

Posted in:General
Posted by David W. Welch on July 24th, 2008 4:30 PM


Sites That Link to This Blog:


English French German Portuguese Spanish