An increase in required down payment could result in a reduction of the number of first-time home buyers purchasing homes. (photo by Toby Boyce)
As the real estate market continues to slowly recover — and slowly is the key word — Congress continues to play with the market.
The latest is a requirment to raise the minimum down payment for FHA loans from the current 3.5% to 5% according to the Dow Jones Newswire. The bill is being circulated by Illinois representative Judy Biggert and would alsocreate other changes in housing programs.
There have been studies dating back years — found one from 1996 — exposing the notion that the lower the down payment the greater the risk of default. However, most of the studies look at the “zero down” programs that have essentially dissapeared in today’s mortgage market.
