April 14, 2025
“Giving debt relief to people that really need it, that’s what foreclosure is.” J.P. Morgan
Down Payment Assistance plans are a bad idea!
I am absolutely against the “new” programs to help first time buyers with the purchase of a house. Buying a new home should be hard! It is a huge decision. To buy a new home ($350,000) this year requires a 20% or higher down payment and a $300,000 mortgage loan. At today’s interest rates, a $300,000 mortgage loan financed for 30 years will cost $285,000 in interest. So-the total cost of the home will be $638,000.
Mortgage lenders know exactly and precisely what type of people (single or married) can “afford” a new home and thus qualify for a mortgage loan. The lenders have meta-data, collecting financial transaction statistics for decades. That is how the loan applications and qualifications are determined. We all know what happened in 2007 -2008 with the sub-prime loan debacle. Millions of people incorrectly “qualified” for home loans and defaulted.
Another example of this economic fallacy is the new car re-possessions in 2024. Biden mailed out millions of stimulus checks in 2021. People already had money; their overall spending was curtailed due to covid. Student loan payments were paused, so people bought new, expensive cars and trucks. Two years later the US saw historic record levels of car repossessions. See above chart.
Now- states like Illinois want to loan new home buyers money toward the down payment or even grant “forgivable” loans (whatever the hell that is). States also want to use taxpayer funds for “home assistance grants,” or even special savings accounts with matching $$$’s provided by the state. These are bad ideas. If you don’t have the down payment, you can’t afford the house. It is that simple. A young person (married or single) can save $40,000 to $50,000 in about 10 years.
Home ownership is an important step in accumulating personal wealth. It takes discipline and planning,
High Truths and Low Lies 