For years, I’ve covered the housing industry for newspapers such as the Washington Post and Chicago Tribune. I also edit a real estate trade magazine. It’ve seen, then, just how hard it is for most people to come up with a downpayment of 20 percent when they want to buy a home.
If you don’t know, mortgage lenders for years asked borrowers to scrape together a downpayment equal to 20 percent of a home’s purchase price. That can be a ton of money. If you buy a modest house for $220,000, a downpayment of 20 percent equals $44,000. I don’t know a lot of people who have that kind of cash sitting around.
During the housing boom, though, lenders relaxed their standards. They began requiring far more doable downpayments of 5 percent, 3 percent or, in some cases, zero percent. That made it easier for people to buy homes. Of course, it also helped push the housing industry into the chaos it’s suffering through now with record foreclosures and plummeting housing values.
So the lenders have changed. Most have done away with no-down programs. Many others have even left behind the 5-percent-down programs. Many borrowers are now going with FHA loans, which require downpayments of just 3-and-a-half percent.
What does all this have to do with careers and jobs? Plenty, as it turns out.
Each year, the National Association of Realtors releases a study gauging the thoughts of the public regarding homeownership and housing affordability. This year’s study said that getting enough money for a downpayment was a stumbling block for 82 percent of survey respondents. And why is it so hard to get a downpayment? Partially because of the economy.
According to the Realtors survey, two-thirds of respondents cited layoffs and unemployment as serious problems today. A total of eight out of every 10 survey participants pointed to these problems as barriers to purchasing a home.
The housing market and the nation’s economy are linked together. And when they’re both performing as miserably as they are today, it makes life exceedingly difficult for most of us.