University of Wisconsin’s wealthy students just received a boost from a new Bank of America policy.
The bank is offering a borrowing cost on down payments for as little as 3 percent. This circumvents the Federal Housing Administration’s regulation that requires a maximum of 3.5 percent down payments for those with low incomes.
This is done by the new policy requiring a high credit score of 660. The average 18-24 year old has, beside little understanding of what credit is, a 630 credit score.
Rich college-aged students have an inherent advantage when it comes to getting this type of down payment because they have no income, like many college students. But, coming from wealth awards them a higher credit rating compared to low-income Americans.
Honestly, every wealthy college student about to graduate should take advantage of this program. Let your parents wire you the monthly mortgage payment for the house or apartment you want to live in. This keeps your income low enough for the program, helps maintain a good credit rating and guarantees a good living arrangement.
Conversely, this is a terrible deal for America’s low-income families. The original FHA program was designed to explicitly help poor families buy houses at a down payment rate that wasn’t ridiculous. The rate could be kept low because the government gives money to lenders that take part in this program.
Big lenders weren’t exactly pleased with this regulation, so many major institutions made errors on the FHA requirements. They ended up getting caught and paying hefty fines and as a result, have pulled back sharply from providing this program.
With Bank of America finding this loophole in the FHA requirements, they can get the federal money for providing FHA loans and almost a guarantee that borrowers will pay their monthly mortgage.
The federal government should close the loophole Bank of America is exploiting because it goes against the intended meaning of the FHA regulations and hurts low-income individuals.
Aaron Reilly ([email protected]) is a freshman majoring in comparative literature and Russian.
