Since the “great recession” and subprime mortgage crisis there has been a significant shift in how many people view home ownership. Not only have views on actual home ownership changed, but for many the idea of how much money to put down on a house has also shifted. Many people saw their down payment vanish as their house lost value. If you were put in a position that you needed to sell your house during this time, that money was gone forever.
I just read a very interesting article in the Chicago Tribune this weekend about a company that is offering insurance plans for your down payment. This really caught my attention as one stumbling block for many potential home buyers is the fear of losing money. It sounds like this may be a great way to ensure you don’t lose your down payment if the market tanks or if something unfortunate happens.
In theory this sounds great, but the more I read the article the more skeptical I got that this would benefit many people. First, you can only make a claim after two years, but no later than 7 years after you purchase the home. Second, the payout amount is tied to a property value index published by the Federal Housing Finance Agency. While your homes value may have declined, if the property value index hasn’t declined you may get very little, or none of your down payment back.
This obviously makes it tricky to decide if a program like this would be right for you. I think it is interesting that such a program exists. For some it might be worth the premium payment to give them some possibility of getting their down payment back if something went South.
Would this be something you would consider when purchasing a home? Let me know your thoughts in the comments section below.
Here is a link to the article and the company that is offering the insurance: