First-time home buyers make up a pretty good chunk of the market, and a good percentage of my own business.  So when Utah Housing announced today that they are lowering their income limits by $15,000 to be able to qualify for their best program, I pay attention.  The argument that only the poorest individuals should receive loans with zero down is an interesting discussion with political overtones.  Let’s be clear here though, Utah Housing is not a government agency that costs taxpayers money.  Utah Housing is a for-profit corporation, sponsored by the state of Utah.  Back when they were an agency, their interest rates were better than the going FHA market rates, and their fees were lower.  Since they have been a corporation, their fees have increased and so have their interest rates, so that a home buyer will pay an additional $1,000 or so in fees and pay 0.25%–0.375% higher in rate than they would have if they had a down payment.  On the flip side, they used to run out of money every three weeks or so until they received a new issue of funds from the federal government.  Where UHC now uses their own funds that they buy at market rates, they no longer have that problem.

Sure it costs more to get a zero down loan, but it also costs more to finance a property in general than it would if you could just pay cash; it’s all a relative argument.  If you just inherited enough money to buy a home, lucky you!  But if someone was to save their money at home until they had enough to pay cash for a home, they would lose out on that many years of appreciation and tax deductible interest.  Depending on how quickly they could save up, they may never be able to afford a home.  So I always tell people to buy a home as quickly as you can using any and all available resources to do it.  But if you make more than $50,000 per year, you’d better save your money.