20% down for a mortgage under fire

[bjl584]

News Headlines

[MonkeyMama]

Wow!

I bought my first home in 1999. Lending standards were still relatively stringent then.

Would I have ever bought a home if I knew that 0% - 3% DOWN would become the norm? I don't know. The swaying factor was that buying was cheaper than renting, and that still may hold true for us. But, as long as people can put little down and just walk away when the going gets rough, house prices will go nowhere. (They will spike and there will be more bubbles, but nothing sustainable).

Everyone I know who is buying at current is putting 0% or 3% down, anyway. Not much has changed. Prices will be artificially high as long as this goes on.

How scary is it that saving 20% for a house is considered *draconian*? The problem is my generation can't wait 5 minutes for anything. How many of us had parents who saved a decade to buy a home? These days, saving a year for a home is considered too much hardship. Of course, I watched too many people trade in $1000/month rent payment for $2500/month mortgage payments, who could never possible save any money for a down payment. So, yes, clearly those mortgage payments are well within their means? They couldn't just save $1500/month for 2-3 years? No, because they can't afford their mortgages, either.

So, nothing changes. Where I see 0% down as the norm, all I see is more housing bubbles. Since people are paying prices they can't really afford to pay.

[disneysteve]

How scary is it that saving 20% for a house is considered *draconian*? The problem is my generation can't wait 5 minutes for anything.

Bingo! I hear people say they can't possibly save 20%. Well then you shouldn't be buying a house.

If everyone had waited until they had a 20% down payment, the housing bubble wouldn't have happened or wouldn't have been nearly as severe. The foreclosure rate would be much lower. There wouldn't be millions who are upside down on their loans.

People need to stop the instant gratification thing. Unfortunately, the only way that is going to happen is for lenders to go back to requiring 20% down and the only way that is likely to happen (since the lenders are behaving just as badly as the customers) is for the government to legislate 20% down payments as the requirement. I hate needing the government involvement but letting the market control things certainly hasn't worked.

[jpg7n16]

from News Headlines

The proposal, which is under comment period until the end of next week, includes a 20 percent down payment for a home loan to qualify as a QRM. If the loan does not meet the QRM standards, the lender must hold on to 5 percent of the risk.

Just another sign that people don't know what the heck they're doing when they buy a property.

What risk?

Oh - the risk that the house will go down in value? Isn't that the whole point of home ownership that you are borrowing a bunch of money from the bank and using it to invest in real estate??

I think people have forgotten that point.

Attn homebuyers: real estate doesn't only go up in value, sometimes it goes down - and that's your responsibility, not the bank's.

If you're afraid the home will crash in value..... don't buy the home!

[GrimJack]

How about "if you are buying a home as an investment, don't by the home"?

[snshijuptr]

I think the worst part for me is that requiring a 20% down payment is "discrimination" as if owning a home in the US is a right not a luxury. If you can never scrap together a 20% down payment then you are not solvent enough to take on a $100K+ loan. Personally, I'm working my butt off over 5 years to save a large down payment, and I plan to probably save for 6 months more after I get a real job. We will buy a small house within 3x our income and feel secure with our decision.

[wincrasher]

My sister is going thru the home buying process right now. They are going 20% down, so the financing end is quite easy - really not a hassle at all. I hear that anything less is near impossible right now. That's why all the bellyaching. In the end, she decided to go with the large down to keep the monthly payment down and not have to waste money on PMI. If you value your credit rating and want a decent home for your kids, you don't have the mindset that I get just not have much of my money at risk and can just walk away. I doubt that very many people think that way - loosing your house is devasting on so many levels. I still believe 99% of people will do anything to keep from loosing their home.

I think you could argue either way whether large down payments have anything to do with price or the risk of being underwater. Certainly with the large down, the risk is to the buyer and with little down the risk is to the bank. That risk should be addressed in the rates, and in having to buy PMI. Where were all those PMI companies during the so-called mortgage crisis?

I've always advocated to not buy anything unless it's a good deal. That is always the case whether the market is strong or weak. With comparables being forclosures and short sales, it's pretty nerve wracking to think you just paid 20% and it could evaporate overnight if a few houses in that neighborhood get foreclosed.

[kork13]

The point that I find so funny is that many of the people who declared bankruptcy, or just walked away from their homes are the same people who were sold on the idea that renting is just washing your money down the toilet. Now, those people are out the same amount (or more) than they'd have paid renting, plus they've got a glaring black mark on their credit. Bravo! You definitely outsmarted the rest of us fools!

It's really no big secret -- if you can truly afford home ownership, go for it. If not, don't try to "make it work" or "hope for the best".

[LivingAlmostLarge]

I agree with MM words. It's probably why other countries that do Adjustable Rate Mortgages can manage because they have to put down 25% or more. It appears it's the mentality more than the mortgages that did the US in.

[elessar78]

From our own experience as being one of the few renters left in our peer group, we always wonder how so and so can buy houses. We make a decent living and I don't feel we're at the low end of our peer group in terms of income. It's a psychological strain and I think there's a stigma among family (and maybe friends) that we're broke, poor, and don't know how to manage money. But obviously we're sane, disciplined, and solvent. we can't put 20% down, manage upkeep, and taxes so we don't over extend ourselves.

all my research says that renting is right for us based on our circumstances. But not everything about money is about logic and there's a lot of pressure to own a home (we can't afford).

[Michael01]

Take the help of the experts for this and u will be able to deal with the problems.

[photo]

From the article:

consumer advocates say it is nothing short of discrimination.

This is becoming ridiculous. Discrimination based on race, religion, sex, and other personal factors is, of course, wrong. However, not loaning money to someone who hasn't shown that the person is a good credit risk, is a very salient kind of discrimination, the lack of which helped create the mess that many people are in today.

Have you been turned down for a loan on a Rolls Royce, regardless of your income? Sue! Because you are a victim of discrimination.

[dawnwes]

We bought our first home in '99 and we didn't have 20% down. I think we had 8%. The house was $142K and we put down 12,000??? Cant' remember exactly. It was not a problem for the banks, in fact, they wanted to give us 300K or more in loans. This was in Southern California (still can't believe we bought a house for 142K in Southern California and in a decent area near Los Angeles.

Man, I wish we had kept that house.....we could have had it paid off by now and living very comfortably. But we were duped into the "upgrade" thinking and once our salaries went up, we moved on to bigger and better.

Sigh,

Dawn

Wow!

I bought my first home in 1999. Lending standards were still relatively stringent then.

Would I have ever bought a home if I knew that 0% - 3% DOWN would become the norm? I don't know. The swaying factor was that buying was cheaper than renting, and that still may hold true for us. But, as long as people can put little down and just walk away when the going gets rough, house prices will go nowhere. (They will spike and there will be more bubbles, but nothing sustainable).

Everyone I know who is buying at current is putting 0% or 3% down, anyway. Not much has changed. Prices will be artificially high as long as this goes on.

How scary is it that saving 20% for a house is considered *draconian*? The problem is my generation can't wait 5 minutes for anything. How many of us had parents who saved a decade to buy a home? These days, saving a year for a home is considered too much hardship. Of course, I watched too many people trade in $1000/month rent payment for $2500/month mortgage payments, who could never possible save any money for a down payment. So, yes, clearly those mortgage payments are well within their means? They couldn't just save $1500/month for 2-3 years? No, because they can't afford their mortgages, either.

So, nothing changes. Where I see 0% down as the norm, all I see is more housing bubbles. Since people are paying prices they can't really afford to pay.