Should You Buy a House Now?

[quote]angry chicken wrote:

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

I’ve written a whole long fucking wall of script about this in PWI a few months ago. The Gov’t did NOT “lower the reqirements to get in”. People just got mortgages that were funded by private investors, and not backed by Fannie, Freddie, or Ginnie Mae.

These were called “Portfolio lenders” and had nothing to do with the government at all. They sold the loans on the secondary market to various hedge funds (remember Bear Stearns?)

The requirements to get an FHA loan have gotten WAY stricter. And you don’t need 20% down! The only thing that does is protect the bank in the event of a foreclosure. Why would you not leverage the most possible money via your mortgage and then invest the rest?

If I had 50,000 (and I do) I most certainly would not use it as a down payment when I could put down 3.5% on an FHA mortgage and invest the money in a better financial instrument than something as volatile at real estate. That’s just insanity!

Look at it this way: if you put 5% down or 20% down, you are still going to use the same criteria to qualify for a monthly payment. As long as you are buying a home you can afford it doesn’t matter. If your home declines in value, so what? pay your mortgage and it will eventually gain value again. “but what if I have to sell? If I don’t put as much down, I’ll have to bring money to the table”. Then bring the money to the table AT THAT TIME! You’ve still lost it anyway weather you put it down at first or if you bring it to the table later. At least you’ve been able to use the money to earn interest on in the meantime if you put it to work for you instead of trapping it in your house.

To reiterate, the only ones who benefit from a 20% down payment is the BANK. Putting more than the minimum down is just silly, IMHO. That’s what mortgage insurance is for. Or just buy the whole thing with cash. Either way, the market is unpredictable. No one has a crystal ball. Buy your home with the best terms available to you at the time. I remember times where people were happy as shit with a 10% interest rate! It’s all relative.[/quote]

Didn’t get the memo about the bubble we had?

[quote]SkyzykS wrote:
AC, you can’t get an FHA if you have that much cash, can you?

Seems like a good time to buy to me though. I did last month.
[/quote]

Why not? The only thing that FHA means is that if the loan defaults, it is guaranteed by Ginnie Mae to like 65% of the total loan amount, and that it is written to a certain set of underwriting standards. Believe me, if you exceed those standards, it is a good thing!

Last month, I did an FHA Jumbo loan for 725K for a borrower with a 750 score and net worth of over 2 Mil… He didn’t want to put down more that 3.5% because his assets were performing well.

[quote]Headhunter wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

I’ve written a whole long fucking wall of script about this in PWI a few months ago. The Gov’t did NOT “lower the reqirements to get in”. People just got mortgages that were funded by private investors, and not backed by Fannie, Freddie, or Ginnie Mae.

These were called “Portfolio lenders” and had nothing to do with the government at all. They sold the loans on the secondary market to various hedge funds (remember Bear Stearns?)

The requirements to get an FHA loan have gotten WAY stricter. And you don’t need 20% down! The only thing that does is protect the bank in the event of a foreclosure. Why would you not leverage the most possible money via your mortgage and then invest the rest?

If I had 50,000 (and I do) I most certainly would not use it as a down payment when I could put down 3.5% on an FHA mortgage and invest the money in a better financial instrument than something as volatile at real estate. That’s just insanity!

Look at it this way: if you put 5% down or 20% down, you are still going to use the same criteria to qualify for a monthly payment. As long as you are buying a home you can afford it doesn’t matter. If your home declines in value, so what? pay your mortgage and it will eventually gain value again. “but what if I have to sell? If I don’t put as much down, I’ll have to bring money to the table”. Then bring the money to the table AT THAT TIME! You’ve still lost it anyway weather you put it down at first or if you bring it to the table later. At least you’ve been able to use the money to earn interest on in the meantime if you put it to work for you instead of trapping it in your house.

To reiterate, the only ones who benefit from a 20% down payment is the BANK. Putting more than the minimum down is just silly, IMHO. That’s what mortgage insurance is for. Or just buy the whole thing with cash. Either way, the market is unpredictable. No one has a crystal ball. Buy your home with the best terms available to you at the time. I remember times where people were happy as shit with a 10% interest rate! It’s all relative.[/quote]

Didn’t get the memo about the bubble we had?
[/quote]

You’re right, HH. We should all just sit in the corner and be scared. No one should buy anything - THAT’LL help our economy! Last time I checked, neither you, I, the talking heads, the FED, or anyone else has a crystal ball… The truth is we DON’T KNOW what is going to happen, or how policy will be adjusted to adapt to what is going on.

If you reduce it back to economic basics and get some altitude and look down on the situation, real estate is still a FINITE commodity. In the past few hundred years in the United States it has ALWAYS appreciated in value despite short term market fluctuations. Those are the facts. But facts like those aren’t as SCARY as the news about the upcoming bubble that will destroy us all!!! Run for the hills, everyone! The BUBBLE is about to collapse!

Last time I checked we are a very resilient country, HH. We will be fine in the long term.

[quote]angry chicken wrote:

[quote]SkyzykS wrote:
AC, you can’t get an FHA if you have that much cash, can you?

Seems like a good time to buy to me though. I did last month.
[/quote]

Why not? The only thing that FHA means is that if the loan defaults, it is guaranteed by Ginnie Mae to like 65% of the total loan amount, and that it is written to a certain set of underwriting standards. Believe me, if you exceed those standards, it is a good thing!

Last month, I did an FHA Jumbo loan for 725K for a borrower with a 750 score and net worth of over 2 Mil… He didn’t want to put down more that 3.5% because his assets were performing well.
[/quote]

Oh, o.k. I must have been confused within the mountain of paperwork that I was filling out.

[quote]SkyzykS wrote:

[quote]angry chicken wrote:

[quote]SkyzykS wrote:
AC, you can’t get an FHA if you have that much cash, can you?

Seems like a good time to buy to me though. I did last month.
[/quote]

Why not? The only thing that FHA means is that if the loan defaults, it is guaranteed by Ginnie Mae to like 65% of the total loan amount, and that it is written to a certain set of underwriting standards. Believe me, if you exceed those standards, it is a good thing!

Last month, I did an FHA Jumbo loan for 725K for a borrower with a 750 score and net worth of over 2 Mil… He didn’t want to put down more that 3.5% because his assets were performing well.
[/quote]

Oh, o.k. I must have been confused within the mountain of paperwork that I was filling out.
[/quote]

LOL - that’s not hard to do! Most of my files these days are more than 2" thick. About a half inch of it is the application and disclosures… I hope you had a good experience.

[quote]angry chicken wrote:

[quote]Headhunter wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

I’ve written a whole long fucking wall of script about this in PWI a few months ago. The Gov’t did NOT “lower the reqirements to get in”. People just got mortgages that were funded by private investors, and not backed by Fannie, Freddie, or Ginnie Mae.

These were called “Portfolio lenders” and had nothing to do with the government at all. They sold the loans on the secondary market to various hedge funds (remember Bear Stearns?)

The requirements to get an FHA loan have gotten WAY stricter. And you don’t need 20% down! The only thing that does is protect the bank in the event of a foreclosure. Why would you not leverage the most possible money via your mortgage and then invest the rest?

If I had 50,000 (and I do) I most certainly would not use it as a down payment when I could put down 3.5% on an FHA mortgage and invest the money in a better financial instrument than something as volatile at real estate. That’s just insanity!

Look at it this way: if you put 5% down or 20% down, you are still going to use the same criteria to qualify for a monthly payment. As long as you are buying a home you can afford it doesn’t matter. If your home declines in value, so what? pay your mortgage and it will eventually gain value again. “but what if I have to sell? If I don’t put as much down, I’ll have to bring money to the table”. Then bring the money to the table AT THAT TIME! You’ve still lost it anyway weather you put it down at first or if you bring it to the table later. At least you’ve been able to use the money to earn interest on in the meantime if you put it to work for you instead of trapping it in your house.

To reiterate, the only ones who benefit from a 20% down payment is the BANK. Putting more than the minimum down is just silly, IMHO. That’s what mortgage insurance is for. Or just buy the whole thing with cash. Either way, the market is unpredictable. No one has a crystal ball. Buy your home with the best terms available to you at the time. I remember times where people were happy as shit with a 10% interest rate! It’s all relative.[/quote]

Didn’t get the memo about the bubble we had?
[/quote]

You’re right, HH. We should all just sit in the corner and be scared. No one should buy anything - THAT’LL help our economy! Last time I checked, neither you, I, the talking heads, the FED, or anyone else has a crystal ball… The truth is we DON’T KNOW what is going to happen, or how policy will be adjusted to adapt to what is going on.

If you reduce it back to economic basics and get some altitude and look down on the situation, real estate is still a FINITE commodity. In the past few hundred years in the United States it has ALWAYS appreciated in value despite short term market fluctuations. Those are the facts. But facts like those aren’t as SCARY as the news about the upcoming bubble that will destroy us all!!! Run for the hills, everyone! The BUBBLE is about to collapse!

Last time I checked we are a very resilient country, HH. We will be fine in the long term.[/quote]

If you buy the biggest and most expensive house with the lowest down payment poossible, what happens when you lose your job? If someone has to put 20% down, they’re WAY less likely to walk away too.

Why do we have a resilient country, AC? Because people think they’re money and savings are safe? What if those things are not safe? What if someone got the idea to inflate away those savings, all for grandiose spending plans?

[quote]Headhunter wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

I’ve written a whole long fucking wall of script about this in PWI a few months ago. The Gov’t did NOT “lower the reqirements to get in”. People just got mortgages that were funded by private investors, and not backed by Fannie, Freddie, or Ginnie Mae.

These were called “Portfolio lenders” and had nothing to do with the government at all. They sold the loans on the secondary market to various hedge funds (remember Bear Stearns?)

The requirements to get an FHA loan have gotten WAY stricter. And you don’t need 20% down! The only thing that does is protect the bank in the event of a foreclosure. Why would you not leverage the most possible money via your mortgage and then invest the rest?

If I had 50,000 (and I do) I most certainly would not use it as a down payment when I could put down 3.5% on an FHA mortgage and invest the money in a better financial instrument than something as volatile at real estate. That’s just insanity!

Look at it this way: if you put 5% down or 20% down, you are still going to use the same criteria to qualify for a monthly payment. As long as you are buying a home you can afford it doesn’t matter. If your home declines in value, so what? pay your mortgage and it will eventually gain value again. "but what if I have to sell?

If I don’t put as much down, I’ll have to bring money to the table". Then bring the money to the table AT THAT TIME! You’ve still lost it anyway weather you put it down at first or if you bring it to the table later. At least you’ve been able to use the money to earn interest on in the meantime if you put it to work for you instead of trapping it in your house.

To reiterate, the only ones who benefit from a 20% down payment is the BANK. Putting more than the minimum down is just silly, IMHO. That’s what mortgage insurance is for. Or just buy the whole thing with cash. Either way, the market is unpredictable. No one has a crystal ball. Buy your home with the best terms available to you at the time. I remember times where people were happy as shit with a 10% interest rate! It’s all relative.[/quote]

Didn’t get the memo about the bubble we had?
[/quote]

You’re right, HH. We should all just sit in the corner and be scared. No one should buy anything - THAT’LL help our economy! Last time I checked, neither you, I, the talking heads, the FED, or anyone else has a crystal ball… The truth is we DON’T KNOW what is going to happen, or how policy will be adjusted to adapt to what is going on.

If you reduce it back to economic basics and get some altitude and look down on the situation, real estate is still a FINITE commodity. In the past few hundred years in the United States it has ALWAYS appreciated in value despite short term market fluctuations. Those are the facts. But facts like those aren’t as SCARY as the news about the upcoming bubble that will destroy us all!!! Run for the hills, everyone! The BUBBLE is about to collapse!

Last time I checked we are a very resilient country, HH. We will be fine in the long term.[/quote]

If you buy the biggest and most expensive house with the lowest down payment poossible, what happens when you lose your job? If someone has to put 20% down, they’re WAY less likely to walk away too.

Why do we have a resilient country, AC? Because people think they’re money and savings are safe? What if those things are not safe? What if someone got the idea to inflate away those savings, all for grandiose spending plans?
[/quote]

If you lose your job it won’t matter if you put down 20% or 3.5%. Here’s an example using REAL numbers: $300,000 sales price with 3.5% down ($10500) with an interest rate of 5%. The payment will include property tax of $285 (1.14 tax rate - pretty average around here), hazard insurance payment of $63 (.26 rate is the average I always use for this), mortgage insurance of $132 (.55 FHA rate - standard across the country) and a $50 HOA fee (pretty average around here).

The monthly payment is $2084 with 3.5% down payment. The payment with 20% down ($60000) is $1675 (Yes, the MI went away and the hazard went down slightly) The difference is only $409 a month.

You’d STILL be screwed if you lost your job, except now you have ~$50,000 LESS in the bank to make your mortgage payment while you look for a job! You have just increased the LIKELIHOOD of a foreclosure - GREAT ADVICE! The bank doesn’t care what you equity is when you stop making your payment.

In fact, if it is a lower LTV, often times they’ll foreclose faster so that they can recoup their losses and not be in the red for once. Even if you collect unemployment, that shit is hardly enough to cover a mortgage payment in most parts of the country.

Why do I think we are a resilient country? Did you really just ask me that? Read a history book. What will happen if we begin to suffer from deflation? People that are smarter than you or me will step in and FIX it. Will it cost money? Sure it will.

Will my grand kids be paying for the mistakes and fiscal irresponsibility that happened under the watch of George W. Bush (which CAUSED the need for a bailout)? Probably. But I have faith in the United States of America’s people and government to manage and survive WHATEVER misfortune befalls us. (that’s why we are currently STILL the greatest country on this planet [IMHO - not trying to sound like an ignorant red neck here, but this is what I believe])

Will America last forever? Probably not. NO empire lasts forever. Will it fall in my lifetime? I doubt it. But if it does, I have a plan of action, including the hard assets necessary to protect me and mine in the event of an economic collapse. So should every responsible adult. I expect the best, but am prepared for the worst, what else can I do?

[quote]angry chicken wrote:

If you lose your job it won’t matter if you put down 20% or 3.5%. Here’s an example using REAL numbers: $300,000 sales price with 3.5% down ($10500) with an interest rate of 5%. The payment will include property tax of $285 (1.14 tax rate - pretty average around here), hazard insurance payment of $63 (.26 rate is the average I always use for this), mortgage insurance of $132 (.55 FHA rate - standard across the country) and a $50 HOA fee (pretty average around here). The monthly payment is $2084 with 3.5% down payment.

The payment with 20% down ($60000) is $1675 (Yes, the MI went away and the hazard went down slightly) The difference is only $409 a month.

You’d STILL be screwed if you lost your job, except now you have ~$50,000 LESS in the bank to make your mortgage payment while you look for a job! You have just increased the LIKELIHOOD of a foreclosure - GREAT ADVICE!

The bank doesn’t care what you equity is when you stop making your payment. In fact, if it is a lower LTV, often times they’ll foreclose faster so that they can recoup their losses and not be in the red for once. Even if you collect unemployment, that shit is hardly enough to cover a mortgage payment in most parts of the country.

Why do I think we are a resilient country? Did you really just ask me that? Read a history book. What will happen if we begin to suffer from deflation? People that are smarter than you or me will step in and FIX it. Will it cost money? Sure it will.

Will my grand kids be paying for the mistakes and fiscal irresponsibility that happened under the watch of George W. Bush (which CAUSED the need for a bailout)? Probably. But I have faith in the United States of America’s people and government to manage and survive WHATEVER misfortune befalls us. (that’s why we are currently STILL the greatest country on this planet [IMHO - not trying to sound like an ignorant red neck here, but this is what I believe])

Will America last forever? Probably not. NO empire lasts forever. Will it fall in my lifetime? I doubt it. But if it does, I have a plan of action, including the hard assets necessary to protect me and mine in the event of an economic collapse. So should every responsible adult. I expect the best, but am prepared for the worst, what else can I do?
[/quote]

If someone plunks down 20% (it was 50% until post WWII), you can bet they’re very sure of their prospects. Bubbles comes about because governments create programs that put marginal people in homes and this bubbles the price. Lenders play along because they know they’ll get bailed out. Given recent events, you really want to defend that?

A bubble economy is an unstable economy. A resilient country is built on stable morality and the ability to plan for the future. Do you really see those things in this country (especially after the dummies voted in the criminals in the White House and Congress)?

[quote]angry chicken wrote:

[quote]Headhunter wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

I’ve written a whole long fucking wall of script about this in PWI a few months ago. The Gov’t did NOT “lower the reqirements to get in”. People just got mortgages that were funded by private investors, and not backed by Fannie, Freddie, or Ginnie Mae.

These were called “Portfolio lenders” and had nothing to do with the government at all. They sold the loans on the secondary market to various hedge funds (remember Bear Stearns?)

The requirements to get an FHA loan have gotten WAY stricter. And you don’t need 20% down! The only thing that does is protect the bank in the event of a foreclosure. Why would you not leverage the most possible money via your mortgage and then invest the rest?

If I had 50,000 (and I do) I most certainly would not use it as a down payment when I could put down 3.5% on an FHA mortgage and invest the money in a better financial instrument than something as volatile at real estate. That’s just insanity!

Look at it this way: if you put 5% down or 20% down, you are still going to use the same criteria to qualify for a monthly payment. As long as you are buying a home you can afford it doesn’t matter. If your home declines in value, so what? pay your mortgage and it will eventually gain value again. "but what if I have to sell?

If I don’t put as much down, I’ll have to bring money to the table". Then bring the money to the table AT THAT TIME! You’ve still lost it anyway weather you put it down at first or if you bring it to the table later. At least you’ve been able to use the money to earn interest on in the meantime if you put it to work for you instead of trapping it in your house.

To reiterate, the only ones who benefit from a 20% down payment is the BANK. Putting more than the minimum down is just silly, IMHO. That’s what mortgage insurance is for. Or just buy the whole thing with cash. Either way, the market is unpredictable. No one has a crystal ball. Buy your home with the best terms available to you at the time.

I remember times where people were happy as shit with a 10% interest rate! It’s all relative.[/quote]

Didn’t get the memo about the bubble we had?
[/quote]

You’re right, HH. We should all just sit in the corner and be scared. No one should buy anything - THAT’LL help our economy! Last time I checked, neither you, I, the talking heads, the FED, or anyone else has a crystal ball… The truth is we DON’T KNOW what is going to happen, or how policy will be adjusted to adapt to what is going on.

If you reduce it back to economic basics and get some altitude and look down on the situation, real estate is still a FINITE commodity. In the past few hundred years in the United States it has ALWAYS appreciated in value despite short term market fluctuations. Those are the facts.

But facts like those aren’t as SCARY as the news about the upcoming bubble that will destroy us all!!! Run for the hills, everyone! The BUBBLE is about to collapse!

Last time I checked we are a very resilient country, HH. We will be fine in the long term.[/quote]

AC, stop worrying about them, we follow the code of when people are greedy, we fear, and when they fear, we are greedy. They buy on the rise, we buy on the fall.

[quote]Headhunter wrote:

[quote]angry chicken wrote:

If you lose your job it won’t matter if you put down 20% or 3.5%.

Here’s an example using REAL numbers: $300,000 sales price with 3.5% down ($10500) with an interest rate of 5%. The payment will include property tax of $285 (1.14 tax rate - pretty average around here), hazard insurance payment of $63 (.26 rate is the average I always use for this), mortgage insurance of $132 (.55 FHA rate - standard across the country) and a $50 HOA fee (pretty average around here). The monthly payment is $2084 with 3.5% down payment.

The payment with 20% down ($60000) is $1675 (Yes, the MI went away and the hazard went down slightly) The difference is only $409 a month.

You’d STILL be screwed if you lost your job, except now you have ~$50,000 LESS in the bank to make your mortgage payment while you look for a job! You have just increased the LIKELIHOOD of a foreclosure - GREAT ADVICE!

The bank doesn’t care what you equity is when you stop making your payment. In fact, if it is a lower LTV, often times they’ll foreclose faster so that they can recoup their losses and not be in the red for once. Even if you collect unemployment, that shit is hardly enough to cover a mortgage payment in most parts of the country.

Why do I think we are a resilient country? Did you really just ask me that? Read a history book. What will happen if we begin to suffer from deflation? People that are smarter than you or me will step in and FIX it. Will it cost money? Sure it will.

Will my grand kids be paying for the mistakes and fiscal irresponsibility that happened under the watch of George W. Bush (which CAUSED the need for a bailout)? Probably. But I have faith in the United States of America’s people and government to manage and survive WHATEVER misfortune befalls us. (that’s why we are currently STILL the greatest country on this planet [IMHO - not trying to sound like an ignorant red neck here, but this is what I believe])

Will America last forever? Probably not. NO empire lasts forever. Will it fall in my lifetime? I doubt it. But if it does, I have a plan of action, including the hard assets necessary to protect me and mine in the event of an economic collapse. So should every responsible adult. I expect the best, but am prepared for the worst, what else can I do?
[/quote]

If someone plunks down 20% (it was 50% until post WWII), you can bet they’re very sure of their prospects. Bubbles comes about because governments create programs that put marginal people in homes and this bubbles the price. Lenders play along because they know they’ll get bailed out. Given recent events, you really want to defend that?

A bubble economy is an unstable economy. A resilient country is built on stable morality and the ability to plan for the future. Do you really see those things in this country (especially after the dummies voted in the criminals in the White House and Congress)?
[/quote]

Most houses also cost around 3/4ths of a mans yearly salary as well. And most people did not live in houses, they lived in rentals.

If you want to go back that far, my Pap as an adult and father growing up lived in a company house, as did many people in this region.

Of course, that was in an entirely different time and economy.

[quote]angry chicken wrote:

[quote]Headhunter wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

I’ve written a whole long fucking wall of script about this in PWI a few months ago. The Gov’t did NOT “lower the reqirements to get in”. People just got mortgages that were funded by private investors, and not backed by Fannie, Freddie, or Ginnie Mae.

These were called “Portfolio lenders” and had nothing to do with the government at all. They sold the loans on the secondary market to various hedge funds (remember Bear Stearns?)

The requirements to get an FHA loan have gotten WAY stricter. And you don’t need 20% down! The only thing that does is protect the bank in the event of a foreclosure. Why would you not leverage the most possible money via your mortgage and then invest the rest?

If I had 50,000 (and I do) I most certainly would not use it as a down payment when I could put down 3.5% on an FHA mortgage and invest the money in a better financial instrument than something as volatile at real estate. That’s just insanity!

Look at it this way: if you put 5% down or 20% down, you are still going to use the same criteria to qualify for a monthly payment. As long as you are buying a home you can afford it doesn’t matter. If your home declines in value, so what? pay your mortgage and it will eventually gain value again. "but what if I have to sell?

If I don’t put as much down, I’ll have to bring money to the table". Then bring the money to the table AT THAT TIME! You’ve still lost it anyway weather you put it down at first or if you bring it to the table later. At least you’ve been able to use the money to earn interest on in the meantime if you put it to work for you instead of trapping it in your house.

To reiterate, the only ones who benefit from a 20% down payment is the BANK. Putting more than the minimum down is just silly, IMHO. That’s what mortgage insurance is for. Or just buy the whole thing with cash. Either way, the market is unpredictable. No one has a crystal ball. Buy your home with the best terms available to you at the time. I remember times where people were happy as shit with a 10% interest rate! It’s all relative.[/quote]

Didn’t get the memo about the bubble we had?
[/quote]

You’re right, HH. We should all just sit in the corner and be scared. No one should buy anything - THAT’LL help our economy! Last time I checked, neither you, I, the talking heads, the FED, or anyone else has a crystal ball… The truth is we DON’T KNOW what is going to happen, or how policy will be adjusted to adapt to what is going on.

If you reduce it back to economic basics and get some altitude and look down on the situation, real estate is still a FINITE commodity. In the past few hundred years in the United States it has ALWAYS appreciated in value despite short term market fluctuations. Those are the facts. But facts like those aren’t as SCARY as the news about the upcoming bubble that will destroy us all!!! Run for the hills, everyone! The BUBBLE is about to collapse!

Last time I checked we are a very resilient country, HH. We will be fine in the long term.[/quote]

If you buy the biggest and most expensive house with the lowest down payment poossible, what happens when you lose your job? If someone has to put 20% down, they’re WAY less likely to walk away too.

Why do we have a resilient country, AC? Because people think they’re money and savings are safe? What if those things are not safe? What if someone got the idea to inflate away those savings, all for grandiose spending plans?
[/quote]

If you lose your job it won’t matter if you put down 20% or 3.5%. Here’s an example using REAL numbers: $300,000 sales price with 3.5% down ($10500) with an interest rate of 5%. The payment will include property tax of $285 (1.14 tax rate - pretty average around here), hazard insurance payment of $63 (.26 rate is the average I always use for this), mortgage insurance of $132 (.55 FHA rate - standard across the country) and a $50 HOA fee (pretty average around here).

The monthly payment is $2084 with 3.5% down payment. The payment with 20% down ($60000) is $1675 (Yes, the MI went away and the hazard went down slightly) The difference is only $409 a month.

[/quote]

AC if you add the mortgage insurance and the difference in mortgage payments, it comes to $541 a month, to me this is a significant difference, especially if you are laid off.

The wisdom of today’s financial planners says to use the cash for investing but what about the interest you are paying on the mortgage? Conventional low risk investments will be lucky to bring in 3% while you are paying +5%. Furthermore, I do believe that the low down payment criteria has led us to where we are, as many who couldn’t really afford it were able to purchase homes.

I do think this is a good time to buy in the right area, IF you can afford it. And I do remember the high interest rates. I bought my first house 24 years ago with an assumable mortgage of 9.75%, which was a steal at the time as the going rate was 13%. However, the house was only $34,000 and you definitely had to have 20% down. Oh for the days of $350 house payments.

My buddy and I were talking about this a couple days ago. He was saying that I was an idiot for buying a house and should have waited for the bottom as well. My response is, I got a 4.9% apr on a house that I bought for $150,000 less then what it sold for in 2005. 10 years from now I HIGHLY doubt I will be kicking myself in the ass saying boy did I really screw the pooch on that deal, I should’ve waited for the housing market to hit rock bottom.

I know people who buy houses and flip or rent them who will say that they will absolutely not buy a house with less than 20% down, I also know people who think putting that much money down is a crappy investment. My thoughts, if 20% of the house cost is 60,000 and you have 65,000 in savings, you’d be an idiot to drop your entire savings on a house, if 20% down is 60,000 and you have 100,000 in your bank account and your having trouble qualifying for a decent apr then maybe putting 20% down isn’t such a bad idea.

I agree with Test1. I’m from the school of thought that you put as much down as you can and then prepay your mortgage so you’re overall interest paid and the duration of the mortgage is greatly reduced. This philosophy was fueled by an experience in my unconsious 20’s — the overrun credit card. Once I woke up and saw what happened and how unmanageable the interest had become I became very ‘credit adverse’. I read books on the fastest way to pay off debt/ mortgages and played around with those tables in various ‘what if’ scenarios. Money ‘not paid’ can be just as satisfying as ‘money made’. (i.e. my previous post in this thread on geothermal heating/cooling systems). I guess it’s kinda like defense and offense. Both important.

[quote]Sweet Revenge wrote:
I agree with Test1. I’m from the school of thought that you put as much down as you can and then prepay your mortgage so you’re overall interest paid and the duration of the mortgage is greatly reduced. This philosophy was fueled by an experience in my unconsious 20’s — the overrun credit card. Once I woke up and saw what happened and how unmanageable the interest had become I became very ‘credit adverse’. I read books on the fastest way to pay off debt/ mortgages and played around with those tables in various ‘what if’ scenarios. Money ‘not paid’ can be just as satisfying as ‘money made’. (i.e. my previous post in this thread on geothermal heating/cooling systems). I guess it’s kinda like defense and offense. Both important. [/quote]

According to the Wall Street Journal, there is a 8+ YEARS oversupply of foreclosed homes. That went down last month (the rate of foreclosure) went down because the banks simply couldn’t keep up with the huge influx of people who couldn’t pay.

Put down 20%, play it safe. Good strategy.

[quote]Headhunter wrote:

[quote]Sweet Revenge wrote:
I agree with Test1. I’m from the school of thought that you put as much down as you can and then prepay your mortgage so you’re overall interest paid and the duration of the mortgage is greatly reduced. This philosophy was fueled by an experience in my unconsious 20’s — the overrun credit card. Once I woke up and saw what happened and how unmanageable the interest had become I became very ‘credit adverse’. I read books on the fastest way to pay off debt/ mortgages and played around with those tables in various ‘what if’ scenarios. Money ‘not paid’ can be just as satisfying as ‘money made’. (i.e. my previous post in this thread on geothermal heating/cooling systems). I guess it’s kinda like defense and offense. Both important. [/quote]

According to the Wall Street Journal, there is a 8+ YEARS oversupply of foreclosed homes. That went down last month (the rate of foreclosure) went down because the banks simply couldn’t keep up with the huge influx of people who couldn’t pay.

Put down 20%, play it safe. Good strategy.
[/quote]

Again, depends on the area and how inflated they were to begin with. I also believe you will see a lot of these homes torn down due to deterioration from poor winterizing and such. Quite a few are uninhabitable with mold and mortgage companies won’t touch them, so you won’t see them flooding the market any time soon.

If I had the money and the desire to be a landlord I believe I could make a killing in my area. Decent lakefront homes going for $200,000. In case you hadn’t notice, they quit making natural lakes a while ago.

Yeah, I think it’s foolish for anyone to say it’s always best to put 20% down or it’s always best to put as little down as possible. Like just about EVERYTHING else in life, individual circumstances are important when making the decision.

I WISH I could find a foreclosed home I’d want.
Where are all these foreclosed homes anyway?
I know there are some really bad pockets in Nevada & California.
And Miami and inner cities I suppose. I’m not seeing any in my neck of the woods.

[quote]Testy1 wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:

[quote]angry chicken wrote:

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

I’ve written a whole long fucking wall of script about this in PWI a few months ago. The Gov’t did NOT “lower the reqirements to get in”. People just got mortgages that were funded by private investors, and not backed by Fannie, Freddie, or Ginnie Mae.

These were called “Portfolio lenders” and had nothing to do with the government at all. They sold the loans on the secondary market to various hedge funds (remember Bear Stearns?)

The requirements to get an FHA loan have gotten WAY stricter. And you don’t need 20% down! The only thing that does is protect the bank in the event of a foreclosure. Why would you not leverage the most possible money via your mortgage and then invest the rest?

If I had 50,000 (and I do) I most certainly would not use it as a down payment when I could put down 3.5% on an FHA mortgage and invest the money in a better financial instrument than something as volatile at real estate. That’s just insanity!

Look at it this way: if you put 5% down or 20% down, you are still going to use the same criteria to qualify for a monthly payment. As long as you are buying a home you can afford it doesn’t matter. If your home declines in value, so what? pay your mortgage and it will eventually gain value again. "but what if I have to sell?

If I don’t put as much down, I’ll have to bring money to the table". Then bring the money to the table AT THAT TIME! You’ve still lost it anyway weather you put it down at first or if you bring it to the table later. At least you’ve been able to use the money to earn interest on in the meantime if you put it to work for you instead of trapping it in your house.

To reiterate, the only ones who benefit from a 20% down payment is the BANK. Putting more than the minimum down is just silly, IMHO. That’s what mortgage insurance is for. Or just buy the whole thing with cash. Either way, the market is unpredictable. No one has a crystal ball. Buy your home with the best terms available to you at the time. I remember times where people were happy as shit with a 10% interest rate! It’s all relative.[/quote]

Didn’t get the memo about the bubble we had?
[/quote]

You’re right, HH. We should all just sit in the corner and be scared. No one should buy anything - THAT’LL help our economy! Last time I checked, neither you, I, the talking heads, the FED, or anyone else has a crystal ball… The truth is we DON’T KNOW what is going to happen, or how policy will be adjusted to adapt to what is going on.

If you reduce it back to economic basics and get some altitude and look down on the situation, real estate is still a FINITE commodity. In the past few hundred years in the United States it has ALWAYS appreciated in value despite short term market fluctuations. Those are the facts. But facts like those aren’t as SCARY as the news about the upcoming bubble that will destroy us all!!! Run for the hills, everyone! The BUBBLE is about to collapse!

Last time I checked we are a very resilient country, HH. We will be fine in the long term.[/quote]

If you buy the biggest and most expensive house with the lowest down payment poossible, what happens when you lose your job? If someone has to put 20% down, they’re WAY less likely to walk away too.

Why do we have a resilient country, AC? Because people think they’re money and savings are safe? What if those things are not safe? What if someone got the idea to inflate away those savings, all for grandiose spending plans?
[/quote]

If you lose your job it won’t matter if you put down 20% or 3.5%. Here’s an example using REAL numbers: $300,000 sales price with 3.5% down ($10500) with an interest rate of 5%. The payment will include property tax of $285 (1.14 tax rate - pretty average around here), hazard insurance payment of $63 (.26 rate is the average I always use for this), mortgage insurance of $132 (.55 FHA rate - standard across the country) and a $50 HOA fee (pretty average around here).

The monthly payment is $2084 with 3.5% down payment. The payment with 20% down ($60000) is $1675 (Yes, the MI went away and the hazard went down slightly) The difference is only $409 a month.

[/quote]

AC if you add the mortgage insurance and the difference in mortgage payments, it comes to $541 a month, to me this is a significant difference, especially if you are laid off.

The wisdom of today’s financial planners says to use the cash for investing but what about the interest you are paying on the mortgage? Conventional low risk investments will be lucky to bring in 3% while you are paying +5%. Furthermore, I do believe that the low down payment criteria has led us to where we are, as many who couldn’t really afford it were able to purchase homes.

I do think this is a good time to buy in the right area, IF you can afford it. And I do remember the high interest rates. I bought my first house 24 years ago with an assumable mortgage of 9.75%, which was a steal at the time as the going rate was 13%. However, the house was only $34,000 and you definitely had to have 20% down. Oh for the days of $350 house payments.
[/quote]

Testy, My quick math description probably wasn’t as clear as it could have been, but I DID subtract the MI back out the payment for the 20% down option so the difference is really only $409.

To which I ask, if you were laid off, would you rather have a $2084 payment and $50,000 in the bank, or a $1675 payment with, say… $10,000 in the bank? Obviously if you have a super high net worth, putting 20% down is a no brainer, but if you DON’T, I think it’s irresponsible, IMHO.

Personally, I’m making a LOT better than 3% on my investments. I have a higher risk threshold than someone who is older than me would have, but nothing reckless…

As for the low down payment being responsible for being where we are, I have to disagree. It was the Stated Income and Stated asset loans and the industry wide FRAUD that was going on.

In today’s FHA lending environment borrowers are not defaulting at unacceptable rates even with a 3.5% downpayment because the INCOME qualification is so strict. Those that do default these days do so generally because of a loss of employment, not because they couldn’t afford the house when they bought it.

Given this case, I’d want them to have as much money in the bank as possible so that they could weather a potential “storm” of unemployment…

It’s ok to have some different opinions on this subject, and I’m glad you shared yours. My perspective is a bit different, though.

[quote]Testy1 wrote:

[quote]Headhunter wrote:

[quote]Sweet Revenge wrote:
I agree with Test1. I’m from the school of thought that you put as much down as you can and then prepay your mortgage so you’re overall interest paid and the duration of the mortgage is greatly reduced. This philosophy was fueled by an experience in my unconsious 20’s — the overrun credit card.

Once I woke up and saw what happened and how unmanageable the interest had become I became very ‘credit adverse’. I read books on the fastest way to pay off debt/ mortgages and played around with those tables in various ‘what if’ scenarios. Money ‘not paid’ can be just as satisfying as ‘money made’. (i.e. my previous post in this thread on geothermal heating/cooling systems). I guess it’s kinda like defense and offense. Both important. [/quote]

According to the Wall Street Journal, there is a 8+ YEARS oversupply of foreclosed homes. That went down last month (the rate of foreclosure) went down because the banks simply couldn’t keep up with the huge influx of people who couldn’t pay.

Put down 20%, play it safe. Good strategy.
[/quote]

Again, depends on the area and how inflated they were to begin with. I also believe you will see a lot of these homes torn down due to deterioration from poor winterizing and such. Quite a few are uninhabitable with mold and mortgage companies won’t touch them, so you won’t see them flooding the market any time soon.

If I had the money and the desire to be a landlord I believe I could make a killing in my area. Decent lakefront homes going for $200,000. In case you hadn’t notice, they quit making natural lakes a while ago.[/quote]

If jobs are vanishing in your state, who is there to buy the home for $200,000? What if prices drifted downward for the next 50 years? (Land in England fell from the 1840’s until the 1950’s, for ex).

If you buy a home for $200,000 AND view it as a consumption item and don’t have to sell, then its fine. What if you have to sell in 8 years (for ex) and can only get $100,000 for it? What if no one will buy it at all and it sits for years? Ohio is not much different than MI and I see homes for sale here that have had the sign in front for years…and years.

Your job transfers you to Atlanta. What do you do when no one even looks at the property?