Recently, a new federal rule was passed that is causing quite a stir among potential homebuyers. The rule states that borrowers with good credit scores will be penalized up to $60 a month to save fees for borrowers with poor credit. While the administration thinks this is a way to help first-time homebuyers and low-income families become homeowners, the reality is quite different.
Firstly, first-time homebuyers and low-income families are competing against cash investors. They are not losing because they can’t get a mortgage, but because a cash buyer is always going to be king. Secondly, while the government is robbing Peter to pay Paul, they are penalizing people who have kept their credit scores strong. It is not going to matter anyway, as most of the houses sold under $500,000 in the last two years have gone to investors.
The question that arises is, what can the government do to help first-time homebuyers and low-income families become homeowners? One suggestion is to put rules in place that the first 30, 60, or even 90 days of a house being on the market can only be purchased by a primary occupant. This is the only way, in my opinion, to fix the issue.
During the crash of 2008, we had similar rules in place, and they worked. However, I am not sure why we are not doing this now. Perhaps there are people smarter than me who know the reason.
The new federal rule penalizing borrowers with good credit scores is not the solution. It is merely a Band-Aid that will not solve the underlying problem. The only way to truly help first-time homebuyers and low-income families become homeowners is to level the playing field by putting rules in place that prevent cash investors from dominating the market.
The new federal rule penalizing borrowers with good credit scores is not the solution to the problem of first-time homebuyers and low-income families struggling to become homeowners. My solution is to implement rules that prevent cash investors from dominating the market. By doing so, we can ensure that everyone has a fair shot at homeownership.
