Higher down payment requirements slowing first time buyers

Scary title, eh? A slow housing market isn’t great, but actually there is a big bright side to this new research. According to the brokerage firm Redfin, home down payment requirements increased by $3,443 in the past six years for the cheapest 25% of homes. What does this mean? It means young adults or those adults with lower incomes who are trying to buy a house are struggling to come up with new down payment requirement. Which in turn, decreases their chances of owning homes. Yes, this sucks, but it only really sucks because we’ve been told the American Dream = homeownership. Is homeownership a great goal? Sure. Is homeownership the pinnacle of financial wellness? Definitely not.

In actuality, homeownership is often what causes financial problems. Owning a house is expensive. This year alone I have thrown down 5k on stuff my house actually needed. I’m not talking about redecorating or something, I’m talking lighting-striking-my-house necessary. So what happens when someone scrimps and saves and puts every last penny into a down payment? They are screwed when they need to call a plumber or replace the furnace or buy a lawnmower.

Homeownership is much more than just the appealingly low monthly mortgage. Sure, it’s unfortunate that higher down payment requirements are forcing people out of the homeownership game but maybe they aren’t ready to be in the game anyway. Look I know it’s uncomfortable to hear, but if someone can’t manage to scrape together a 10% down payment and have enough left over for an emergency, then they aren’t prepared to be a homeowner. 

Being a homeowner is a major financial commitment, and it’s one you shouldn’t enter into lightly. It shouldn’t be easy, it should be hard. There should be hoops to jump through, and it should require a sizable down payment. If you’ve got no skin in the game, you’ve got nothing to lose. And you don’t have nothing to lose, you have a lot to lose, you have a whole house to lose!

We can’t be upset that down payment requirements are rising. Rising down payments are better for your personal finances. Your first priority is your own money; how this impacts the economy isn’t your primary concern.

For more, listen to this segment from The Pete the Planner Radio Show on WIBC:

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