When discussing the future of housing finance, nothing stirs more passion than the question of what sort of down payment is appropriate when buying a home- 0%? 5%? Maybe 10% or even 20%? It’s called “skin in the game”.
While all sides believe their positions are rooted in fact, hard data is rarely cited. For those in the ‘bigger is better’ camp, opinions are ‘supported’ by vague incantations like ‘low down payments caused the real estate crisis’ or, the government is ‘wasting’ tax payers’ money by subsidizing home ownership. Many of these advocates for larger down payments and no down payment assistance- typically homeowners themselves- fail to acknowledge that they too benefit from a significant federal subsidy- the home mortgage interest deduction.
The level of emotion and sometimes outright hostility engendered by this debate can only be explained by deeply held opposing world views on who is qualified to own a home. It’s certainly an important debate as housing policy is reconsidered. It would be interesting to understand more about the forces that shape these views, but we’ll leave that to social scientists and other academics.
You’ve probably figured out by now that we believe high loan-to-value lending is safe and sustainable when executed responsibly. keep reading