So does 1.5% make a difference???

In my investment market the most popular loan programs are sponsored by FHA.  Which only requires 3.5% down payment for first time buyers and given the $8k tax credit meant each buyer would have to come up with very little out of pocket cash when they netted out the tax savings. 

As we are relearning if the home owner has next to no skin in the game they are less motivated to keep paying on a depreciating asset.  Given the poor performance new FHA loans, FHA is looking at raising the requirement almost 30%.  But on a nominal basis the change will only take it from 3.5% to 5%.  So why does 1.5% make such a big difference?

People are suggesting that this small change is going to put a damper on the housing market.  I say are you kidding me.  The market is going to cool down because the supply of housing is going up and demand is going down.

If you don’t have 5% or even 10% for the down payment keep saving.  Owning a home is a great thing but it can not be just given to everyone. 

Don’t blame FHA changes for the coming slow down in real estate sales.  If FHA doesn’t address their guidelines now they will just become the next sub prime lender and all of us tax payers will feel the burden of bailing them out.

We need to create loan programs that encourage investors to own real estate.  We need to encourage capitalism to insure we turn this thing around.

Good Investing