[quote=ucodegen]
Hear hear.. and across the board too.. for all loans. One of the worst things that happened to low-income homebuyers was the Community Revitalization Act 1977 (and subsequent amendments/revisions). Before this act, most houses (median) were priced at about 3x gross income (median). Afterwords the ratio shot up. The result is that people (particularly low-income) pay a greater percentage of their income to cover ‘renting their own house‘ than any other expense. The secondary result is that discretionary income drops as well as the ability to save.
[/quote]
All else equal, it is harder for a low-income homebuyer to save enough money for 20% of 3x his gross income. Basic cost of living is the same for everyone – non-discretionary expenses constitute greater fraction of income. Above certain level, every extra dollar of income (less taxes) can be saved. Thus it’s much easier to save 120k when you make 200k than to save 30k when you make 50k.
Mandatory 20% down payment for everyone would push disproportionate numbers of low-income families into rentals and disproportionate numbers of low-income houses into investors’ hands.
