Low Down Payment Requirements of FHA Loans Triggers Criticism

[Corey Dutton]

With only a 3.5% down payment and a 580 minimum credit score requirement,

many critics believe FHA loans are encouraging another crisis. In the U.K. and in

Germany for example, home ownership is only for those who can afford to bring

in 25-30% down towards the purchase. In other words, home ownership is for

the privileged few. So why in the U.S. is home ownership given to everyone has

nearly a right? Both the Clinton and Bush Administrations pushed heavy

propaganda leading up to the crisis with slogans like, “Every American should be

able to own their own home.” Well, we all know what that propaganda created,

the worst recession since the Great Depression in the U.S.

With the highest default rate in the sub 600 credit score category, some FHA

lenders are pushing this requirement of 580 up to over 600. But with such low

down payment requirements, what would prevent these borrowers from

walking away when times get tough? In my opinion, nothing will prevent them

from walking away if the market crashes again with such low down payment

requirements. What is there to lose?

Posted by Corey Curwick Dutton, Hard Money Lender