Not counting costs
A new government policy will, again, encourage irresponsible homebuying
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Our first homebuying experience was a disaster. We were moving from New Mexico to Texas in response to a job offer. The plan seemed sensible: My husband looked forward to the job, and I would be closer to family while expecting our first baby. After scouting a few for-sale-by-owner properties, we chose one, told the owners we would buy it, set up an account at the local bank, applied for a loan, and drove back to New Mexico to pack. Arriving in Texas with a pickup truck piled up like the Joad family’s in The Grapes of Wrath, we expected to move right into an empty house. But not so fast!
Having paid cash for everything up to that point, we had no credit history, and the loan officer seemed to think that was a problem. The bank was willing to work with us, but it took months to establish ourselves as a good risk, and shortly after settling into the house my husband decided he didn’t like the job or the town. We’d been accustomed to moving on when the situation didn’t suit, but now we had a baby, as well as this unwieldy chunk of real estate.
In desperation I poured out my woes to my mother, guessing what she would do. And she did: She assumed our loan and rented out the property for a few years until managing from afar became too difficult. So she sold it, probably at a loss. I’ve felt guilty about that ever since.
How could a young couple be so naïve? I expect first-time homebuyers today are better informed than we were, but ownership still brings unexpected responsibilities. I would advise newlyweds not to buy a home for at least five years, until they have a good idea what they’ll be doing and where they want to live for the foreseeable future. Ten years might be better, allowing plenty of opportunity to establish credit, pile up savings, become acquainted with the basics of home maintenance, and become educated on how the real-estate and mortgage markets work.
Even then, homeownership isn’t for everybody. Renting might be a better option for the footloose and undecided, the unmarried, or the just-divorced. There are good reasons to buy and good reasons to rent, depending on circumstances. But the U.S. government has encouraged homeownership for decades, whether fecklessly or recklessly.
The financial crisis of 2007-08 was driven by “predatory lending” to borrowers who couldn’t repay. Some borrowers were irresponsible, some unfortunate, and some didn’t fully understand what they were getting into, having heard more about the benefits than the risks. Lending institutions get the blame for the cascade of defaults that followed, and they deserve it. But often overlooked is the role of the Feds in loosening restrictions and encouraging banks to pave the road to homeownership for low-income buyers, particularly minorities.
Now they seem ready to put a thumb on the scales again. The Federal Housing Finance Agency’s new matrix for loans raises mortgage fees for borrowers with good credit in order to subsidize those with worse credit and little or no down payment. This comes when the housing market is already struggling with higher interest rates and low supply. The FHFA penalizes those who managed their money responsibly in order to reward those who didn’t, or who need more time to establish themselves. Perhaps worst of all, it incentivizes homebuying for those who may not be ready for that responsibility.
“For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?” (Luke 14:28). Christ was using a commonsense example to illustrate the cost of discipleship, but it’s still common sense. As are warnings (see Matthew 18:6) about those who lead little ones—such as the naïve and the unready—astray. My husband and I learned the hard way, but woe to the government that greases the slope to even harder lessons.