There has been a ton of significance placed on large down payments in recent years given our nation’s massive foreclosure rate. The mindset is that without enough “skin in the game,” without enough of a borrower’s own money put down upfront, homebuyers are less affected when their investment turns sour and more likely to walk away.

Given this mindset, minimum-down-payment requirements have increased for many home loans, making it more difficult for prospective buyers to save for those 15 to 20 percent down payments.

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If you’re a parent, would you help your adult children buy their first home?

According to Better Homes and Gardens Real Estate, 20 percent of all baby boomers would gift or loan money to their children or grandchildren to acquire a home.

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When you’re saving to buy a home, it’s easy to focus all your attention on a home’s price and the loan’s interest rate. However, you can’t forget to factor in closing costs when determining your level of affordability.

What are closing costs?

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The FHA’s new commissioner, Bob Ryan, has been on Capitol Hill recently giving his view regarding the qualified residential mortgage (QRM),  the home loan that is destined to play a big role in the mortgage market looking forward.

Under the Dodd-Frank Wall Street Reform Act, lenders can make QRMs or loans which are not QRMs. This is not a light choice, however. The law passed last summer virtually requires lenders to make QRMs. Why? If as a lender you originate a loan which is not a QRM, you must keep a reserve equal to 5 percent of the loan amount.

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According to the latest National Housing Survey by Fannie Mae, poor credit is the number one stumbling block keeping potential borrowers from owning a home. Recent economic hardships have caused millions of Americans to fall behind on their bills and their mortgage payments. The foreclosure crisis has caused lenders nationwide to reevaluate their lending standards, increasing qualifications, most commonly insisting on higher credit scores than in years before.

That said I want to know, “What’s preventing you from buying a home?”

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A recent report says the number of Americans withdrawing early from their retirement savings to support their homes has grown substantially:

Fidelity [Investments] reported that 62,000 people made hardship withdrawals from their 401(k) workplace plans during the second quarter, compared to 45,000 during the prior quarter, a 37 percent increase.

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Especially in today’s real estate market where many mortgage lenders are requiring borrowers to put 20% down, saving for an adequate downpayment may be unattainable for many. The findings from a recent National Foundation for Credit Counseling (NFCC) survey agrees:

The NFCC recently asked consumers about their ability to meet the down-payment requirements associated with buying a home in today’s market. Of the more than 2,000 respondents, almost half (49 percent) admitted that they’d never be able to save enough money for a down-payment on a home.  This is discouraging news for the housing market in general, lenders, potential buyers, as well as existing homeowners.

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Federal interaction and incentives combined with the dismal conditions of the housing market have concocted the “perfect storm” for eager first-time homebuyers shopping for a great deal. Mortgage rates are at historic lows, first-time buyers can take advantage of an $8,000 tax credit, home prices are tumbling, and home owners are eager to sell. Could the time be any more right?

Before you jump in with both feet, here are a few important factors to first consider: Read the rest of this entry »