Is Fox Hostile To Home Ownership?
Reported by Ellen - May 25, 2009 -
Guest blogged by Dan
In a recent column, Fox Business' Brian Sullivan complains that the First Time Homeowner Tax Credit of $8000 may be allowed to be used as a down payment on a home.
Sullivan writes:
The already tiny 3.5% down payment required by the FHA and the $8,000 tax credit isn’t good enough to entice buyers into homes. Now the plan is to allow home buyer to use the tax credit as the down payment....Aren’t uber-low mortgage rates and low-to-no down payment requirements part of the reason we created the damaging housing bubble in the first place? Shouldn’t we require at least some real equity be put into a loan the size of most mortgages?
Mr. Sullivan's math has been an issue in the past. Now his use of English is suspect. He cites a required downpayment of 3.5% on a home. I haven't seen that figure, but let's accept it. He complains that the use of the first time homeowner credit as a downpayment will inflate home prices as "unworthy" buyers will use the credit to inflate the price of homes. But an $8000 downpayment even at the 3.5% level will only support a price of $228,571.42 ($8000/.035). How can you have a bubble where there is an absolute ceiling price?
Mr. Sullivan objects that buyers using the credit as a downpayment will have no real equity in the home. Wrong. The tax credit would have been cash in the pocket. Instead it is equity in the home. Where's the problem?
It's not like a loan downpayment is the only expense for a home buyer. Although amounts will vary and localities will differ there are numerous fees involves in buying a home. Loan discount fees; appraisal fees;credit report fees; tax service fees; flood certification fees; processing fees; wire fees; settlement fees; title examination fees; hazard insurance; city and county taxes; recording taxes; survey fees; and more. There is a lot more to buying a home than just the downpayment. Any buyer will put significant cash into the deal beyond the loan downpayment.
Furthermore, it is the job of the lending institution making the loan for a home purchase to determine the credit worthiness of the buyer/borrower. I understand that people lose jobs and some otherwise good loans go sour; but it is the lending institution's problem if they make unwise loans, not the fault of the individuals who applied for the loans.
Between EMac's recent suggestion that foreclosed homes be demolished and Sullivan's complaint about how the First Time Tax Credit can be used, I see a pattern. Fox Pundits don't like the idea of home ownership. I do not understand why.
