A collection of new policies—including lower down payment requirements, decreased mortgage insurance premiums and looser lending standards—are intended to make it easier for first-time buyers across the United States to get a loan.
But as USA Today reports, some say the changes won’t remove the underlying hurdles for first-time buyers, like slow wage growth and student loan debt. And some lawmakers have criticized the policies as a step toward the risky lending practices that led to the 2007 housing crash. But lenders and real estate officials say they expect the changes to bring a wave of new homebuyers in 2015.
Recent policy changes aim to improve access to home loans in several ways. In December, mortgage giants Fannie Mae and Freddie Mac announced they would reduce the minimum down payment on certain mortgages from 5% to 3%. For someone buying a $150,000 home, the change means the difference between a down payment of $7,500 and $4,500.
In January, the Federal Housing Administration announced it was reducing mortgage insurance premiums by 50 basis points. The White House has said the reduction would save the average homebuyer about $900 a year and would enable about 250,000 people to buy a home.
Meanwhile, lenders have been lowering some of the requirements on borrowers in response to federal regulators clarifying mortgage lending rules created in the wake of the 2007 housing crash.
Brad Blackwell, executive vice president with Wells Fargo Home Mortgage, says he expects first-time home sales to grow less than 10% in 2015, but he said it would still be a “meaningful” increase.
Donna Wolff, president of the Greater Baton Rouge Association of Realtors, recently told Daily Report that she thinks the return of first-time homebuyers to the local market will help the eight-parish region build on the 3.2% increase in sales recorded in 2014, compared to 2013 sales.
“We didn’t have that first-time homebuyer last year; investors filled that void,” Wolff says. “The lending constraints were more difficult last year, and also a lot of them have heavy education debt they’re dealing with. But with interest rates expected to stay low until the later part of the year, I think we’re going to see them return this year.”
First-time homebuyers accounted for only 33% of home sales in 2014, the smallest share since 1987, according to a report from the National Association of Realtors. Historically, first-time buyers have accounted for more than 40% of sales and have played a key role in the market, allowing established homeowners to trade up for pricier houses.
