Down Payment Protection
Amazing! Potential home buyers want down payment protection. They are reluctant to buy a home for fear that their down payment could be lost if they sell their house in a few years, according to a recent online survey conducted by Harris Poll.
Amy Swinderman, staff writer at INMAN says, “Saving for a down payment and feeling confident that their investment will be protected remains a significant barrier for many would-be homebuyers, the survey concluded. Only 55 percent of renters are confident they will get a return on their down payment investment if they buy today, but sell their home within the next few years, the survey said.
“According to the survey, 81 percent of renters and 67 percent of homeowners believe that down payment protection would give people more confidence in buying a home. About 63 percent of renters said they would be more likely to buy a home sooner if they could have the option to buy down payment protection. More than half of millennial homeowners said they would be more likely to buy a new home if they can have the option to buy down payment protection.”
ValueInsured is offering the +Plus program and it will be available to buyers of existing or new single-family homes in all 50 states after January 2016. Buyers who purchase the policy will pay a one-time fee at closing.
“Rates,” says Swinderman, “will vary depending on the buyer’s state, but on average, buyers will pay about $1,000 for the policy. In some cases, lenders may agree to pay for the coverage and charge the buyer a higher interest rate, which would increase monthly or other periodic loan payments. Other options include a seller paying for it, or a buyer’s agent paying for it.
“Coverage only applies if the sale price of the home is lower than the purchase price, and if the Federal Housing Finance Administration (FHFA) Home Price Index (HPI) for the homeowner’s state at the time of sale is lower than it was on the date he purchased the home. The payout is calculated as the lesser of the homeowner’s down payment; the actual equity lost; or the purchase price of the home, times the reduction in the homeowner’s state HPI. Some eligibility requirements apply.”
I say bravo if it will help move renters into a new or existing house. Most surveys show a decided cost advantage of owning a house over renting. Surveys show, for example, that rent takes a bigger slice of monthly income than does owning.
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