Congress set to eliminate down payment assistance

AMERICA (NEWSCHANNEL 3) - Buying your own home is a big part of the American dream, but with congress eliminating down payment assistance it's going to be harder for many people to buy their first home, their second home, and that's not all.

Recent legislation signed by President Bush abolished the seller-funded down payment assistance programs. This means that as of October 1st, if you want to buy a house, zero-down won't fly, you need cash up front.

The Department of Housing and Urban Development (HUD) says that zero-down mortgages are a big part of the current mortgage crises. In fact home owners who utilize seller down payment assistance experience foreclosure rates three times as often as other borrowers.

Louis Berra, of HUD, said that "there's no incentive for the owner to stay in the home. There's no down payment, so there is a high rate of default and foreclosure because they'll just walk away."

Now, HUD will require buyers to put up at least three and a half percent of a home's purchase price for a down payment, a move that many feel will cripple an already ailing economy.

John Rice, of Greenridge Realty, posed Newschannel 3 the question of why someone would "take it out of savings when you could potentially borrow that money and turn around and put it into the local economy, buy a new fence, buy some new furniture, fix up the home you just bought."

Even though congress won't officially eliminate down payment assistance until October 1st, most home lenders say that they will no longer offer the loans after August 31st.

People looking for help in buying their homes are encouraged to call the Hope Now Alliance at 1-800-995-HOPE, or the FHA at 1-800-CALL-FHA.