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      11-09-2012, 05:41 PM   #155
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Yes, FHA has an upfront fee (a percentage of the overall loan), and a monthly insurance fee until you reach 20% I believe.

It's supposed to be a buffer as it supposedly adds to FHA reserves in case of default. That reserve in July when 48laws gave his horrible advice was around 1% (of total liabilities). Now it's even less than that, and FHA is going to need a public, tax payer, subsidized bailout.

Of course I predicted this in July 2012, and guys like 48laws were quick to point out that the mortgage insurance would save FHA as a "buffer", as you can see, he was horribly wrong.

But I guess we all have to pay for it since guys like 48laws who thought 3.5% down was a smart mortgage decision are now dumping their bad financial decision on all of us. Go USA!
Good thing I didn't go FHA then.
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      11-11-2012, 02:22 PM   #156
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Yes, FHA has an upfront fee (a percentage of the overall loan), and a monthly insurance fee until you reach 20% I believe.

It's supposed to be a buffer as it supposedly adds to FHA reserves in case of default. That reserve in July when 48laws gave his horrible advice was around 1% (of total liabilities). Now it's even less than that, and FHA is going to need a public, tax payer, subsidized bailout.

Of course I predicted this in July 2012, and guys like 48laws were quick to point out that the mortgage insurance would save FHA as a "buffer", as you can see, he was horribly wrong.

But I guess we all have to pay for it since guys like 48laws who thought 3.5% down was a smart mortgage decision are now dumping their bad financial decision on all of us. Go USA!

But that doesn't go toward your equity/principle right?

Why the hell would someone pay X amount more per month and not have it go towards their property?
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      11-12-2012, 01:10 PM   #157
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But that doesn't go toward your equity/principle right?

Why the hell would someone pay X amount more per month and not have it go towards their property?
Nope.

Mortgage insurance is simply a fee associated with higher risk loans. PMI isn't anything new.

As to why buyers do it, why do people take out credit cards when the offered rate in 20%? It's because they have compromised credit.

Lending institutions allow you to take out a loan for more than an 80% LTV, but you have to pay a fee. People do it because they don't have 20% down, they have bad credit, or other factors that make getting a traditionally financed loan difficult.

The only thing is, moral hazard has increased so much in the housing market that PMI does nothing to prevent a home debtor from simply walking away from the home, and dumping the debt onto the lender. Usually the amount of mortgage insurance collected is FAR below the remaining balance of the loan in case of default. Hence, FHA is insolvent, and going to get a tax payer subsidized bailout footed by you, me, and anyone else who makes enough to actually pay taxes.
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      11-12-2012, 01:51 PM   #158
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Nope.

Mortgage insurance is simply a fee associated with higher risk loans. PMI isn't anything new.

As to why buyers do it, why do people take out credit cards when the offered rate in 20%? It's because they have compromised credit.

Lending institutions allow you to take out a loan for more than an 80% LTV, but you have to pay a fee. People do it because they don't have 20% down, they have bad credit, or other factors that make getting a traditionally financed loan difficult.

The only thing is, moral hazard has increased so much in the housing market that PMI does nothing to prevent a home debtor from simply walking away from the home, and dumping the debt onto the lender. Usually the amount of mortgage insurance collected is FAR below the remaining balance of the loan in case of default. Hence, FHA is insolvent, and going to get a tax payer subsidized bailout footed by you, me, and anyone else who makes enough to actually pay taxes.
I can see the attraction from buying a property with only 3.5% down...but I don't personally see the justification for the PMI.

Just rent or find something cheaper....but finding something cheaper isn't the American way, right?

Thanks for the clarifications.
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      11-12-2012, 03:21 PM   #159
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I can see the attraction from buying a property with only 3.5% down...but I don't personally see the justification for the PMI.

Just rent or find something cheaper....but finding something cheaper isn't the American way, right?

Thanks for the clarifications.
I always tell people who feel they are pressured to buy a home:

There are people who are richer than you that just rent.
There are people poorer than you who try to buy.

Then, depending on what you buy, maintenance can be a nightmare...

All you need is a place to live (legally).
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      11-12-2012, 03:52 PM   #160
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I always tell people who feel they are pressured to buy a home:

There are people who are richer than you that just rent.
There are people poorer than you who try to buy.

Then, depending on what you buy, maintenance can be a nightmare...

All you need is a place to live (legally).
I'm personally not a fan of rent, and I do feel it's always best to buy if you can afford it

Even buying cash doesn't mean you can live in a place for "free"
Property tax, HOA dues, maintenance.... you breath and you have to pay.... but it is what it is.
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      11-13-2012, 12:03 PM   #161
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I always tell people who feel they are pressured to buy a home:

There are people who are richer than you that just rent.
There are people poorer than you who try to buy.

Then, depending on what you buy, maintenance can be a nightmare...

All you need is a place to live (legally).
Yup, it's all about the personal circumstances. I say if you have a sizable down payment, 20%+, and have reasonable expectations that your job will be around for more than 5 years, then buying right now isn't a horrible decision.

It's the people who drive a $60,000 M3, and then complain they "can't save 20%" and use FHA instead who should really think about their decision.
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      11-14-2012, 12:19 PM   #162
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What do I tell a coworker who really wants to buy a house (he's renting), but he really wants the FHA program? He says he and his wife don't save a lot (she doesn't work and is getting her masters; he pays for everything); he has a child, and is banking on the FHA loan? I showed him some of the articles posted before.
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      11-14-2012, 01:10 PM   #163
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What do I tell a coworker who really wants to buy a house (he's renting), but he really wants the FHA program? He says he and his wife don't save a lot (she doesn't work and is getting her masters; he pays for everything); he has a child, and is banking on the FHA loan? I showed him some of the articles posted before.
Buy something cheaper then?
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      11-15-2012, 10:58 AM   #164
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What do I tell a coworker who really wants to buy a house (he's renting), but he really wants the FHA program? He says he and his wife don't save a lot (she doesn't work and is getting her masters; he pays for everything); he has a child, and is banking on the FHA loan? I showed him some of the articles posted before.
Well, let's think about it.

Do you think a guy who is barely able to save money, on a single income, should be purchasing a home with his wife still in school and with a small child? That's seems extremely risky, if not irresponsible IMO.

Your friend seems to be living above his means if he can't save money, or he's got tons of debt that is sucking up a lot of his take home pay. Either way, it's not a good situation to be in when making one of the biggest purchases of your life.

He should wait until his financial situation gets better, or rent somewhere cheaper so he can actually save money. One of the best things he can do in this economy is pay off debt. That will give you instance "returns".

I don't think it's the right time for him to buy a home.
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      11-15-2012, 11:59 AM   #165
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Quote:
Originally Posted by josephr25 View Post
What do I tell a coworker who really wants to buy a house (he's renting), but he really wants the FHA program? He says he and his wife don't save a lot (she doesn't work and is getting her masters; he pays for everything); he has a child, and is banking on the FHA loan? I showed him some of the articles posted before.
I would agree that it doesn't seem like the right time financially to buy a home for him. If he doesn't save very much, would he even have the 3.5% required for an FHA loan? There are also other potential costs to factor in such as a home inspection, closing costs, and moving costs. He may also have to buy appliances as not all places have a refrigerator or washer and dryer. These are some of the costs people don't necessarily think of when they start shopping for a house.

It would probably be best for them to wait until she finishes school and finds a job. Once that happens, it will improve their debt to income ratio which will allow them to save more for a house.
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      11-15-2012, 12:58 PM   #166
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I would agree that it doesn't seem like the right time financially to buy a home for him. If he doesn't save very much, would he even have the 3.5% required for an FHA loan? There are also other potential costs to factor in such as a home inspection, closing costs, and moving costs. He may also have to buy appliances as not all places have a refrigerator or washer and dryer. These are some of the costs people don't necessarily think of when they start shopping for a house.

It would probably be best for them to wait until she finishes school and finds a job. Once that happens, it will improve their debt to income ratio which will allow them to save more for a house.
Yeah I told him about these things and what Media said, but he is determined to buy a place... even thought about moving out of state. I wish he would look at the bigger picture besides just owning a place... he's had a questionable credit history too.

He's renting in a relatively wealthy area so that his kid can grow up in a good neighborhood, but that just brings up more red flags itself.
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      11-15-2012, 03:21 PM   #167
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Yeah I told him about these things and what Media said, but he is determined to buy a place... even thought about moving out of state. I wish he would look at the bigger picture besides just owning a place... he's had a questionable credit history too.

He's renting in a relatively wealthy area so that his kid can grow up in a good neighborhood, but that just brings up more red flags itself.
I think in many aspects, he's like a lot of other people who have been tricked into thinking home ownership is the American dream, and everyone should buy a home. Everyone should lease and expensive sports car. It's only credit, it's not money right?

You would think after millions of foreclosures, and trillions in lost housing equity, people would learn their lesson, and actually do the arithmetic to see how much they can truly afford.

But I swear it's like they are lemmings jumping off a cliff, it's emotion over logic. I don't understand it, and the worst part is with this looming FHA bailout, they are bringing the rest of us over that same cliff.

I hope the end result of this bailout is that FHA finally disappears as a defacto sub-prime lender, and we don't give $729,000 FHA loans anymore to people with 600 FICO scores.
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      11-15-2012, 04:22 PM   #168
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I think in many aspects, he's like a lot of other people who have been tricked into thinking home ownership is the American dream, and everyone should buy a home. Everyone should lease and expensive sports car. It's only credit, it's not money right?

You would think after millions of foreclosures, and trillions in lost housing equity, people would learn their lesson, and actually do the arithmetic to see how much they can truly afford.

But I swear it's like they are lemmings jumping off a cliff, it's emotion over logic. I don't understand it, and the worst part is with this looming FHA bailout, they are bringing the rest of us over that same cliff.

I hope the end result of this bailout is that FHA finally disappears as a defacto sub-prime lender, and we don't give $729,000 FHA loans anymore to people with 600 FICO scores.
I don't know how people get these loans. In the middle of this past summer my wife and I (both have nearly perfect credit, no auto loans, and plenty of income) were put through the ringer to get a $415,000 loan while putting 23% down.
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      11-15-2012, 04:24 PM   #169
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it's emotion over logic. I don't understand it,
Could the REAL Story be that it's his WIFE making the decisions/pressuring him?

Since that statement is what you'd expect if it was a woman making the choice.. and we wouldn't be surprised.
No not being sexist (ok maybe a little), but we all know that the majority of women make decisions based more on emotion than logic.

And because we men cannot understand it, it MUST be coming from a woman's mind...right?
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      11-15-2012, 05:44 PM   #170
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Could the REAL Story be that it's his WIFE making the decisions/pressuring him?

Since that statement is what you'd expect if it was a woman making the choice.. and we wouldn't be surprised.
No not being sexist (ok maybe a little), but we all know that the majority of women make decisions based more on emotion than logic.

And because we men cannot understand it, it MUST be coming from a woman's mind...right?
If it was the other way around, I'd still question the idea that there's only one person working and that there's grad school debt.
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      11-15-2012, 05:46 PM   #171
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I don't know how people get these loans. In the middle of this past summer my wife and I (both have nearly perfect credit, no auto loans, and plenty of income) were put through the ringer to get a $415,000 loan while putting 23% down.
My friend who works at Chase told me a story during the sub-prime era... when my friend would reject an application because of all that credit stuff blah blah blah, his coworker would pick that person up and approve them eventually.

Profit>integrity.
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      11-15-2012, 07:21 PM   #172
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I just got turned down for a loan I was going to put 30% down so my payments would be lower and with 780 fico but the reason I was denied is because I am self employed. whamp whamp whamp.
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      11-15-2012, 07:28 PM   #173
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I don't know how people get these loans. In the middle of this past summer my wife and I (both have nearly perfect credit, no auto loans, and plenty of income) were put through the ringer to get a $415,000 loan while putting 23% down.
There are plenty of shady lenders out there who will underwrite any crappy loan and package it up. Especially FHA where they know that the government is on the hook for it. I've seen people with foreclosures from 2008-2009 qualifying for loans again. So there are lenders out there acting like it's 2005-2006.

FHA hasn't been serving its original purposes for a very long time, it's simply a sub-prime lender, and now we're going to pay for it. Funny thing is I called it nearly 2 years ago in this thread:
http://www.e90post.com/forums/showth...&highlight=FHA

Of course I had people jumping down my throat saying I didn't know what I was talking about, guys like "NBRider88" and "48laws", yet, here we are. FHA is bankrupt, and we the taxpayer are going to bailout the lemmings who went and bought $500,000 homes with barely any income, and no savings. Go USA!
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      11-16-2012, 07:39 PM   #174
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This thread has had some activity! From what media artist has said, it seems that the program has been taken advantage of. I am thankful for the program. I feel I used the program responsibly and with out it, I would not have passed the 1 year mark of home ownership. Instead, it would have been a lost opportunity and I would have shelled out another $13,200 to a crappy landlord.

If used as intended and responsibly, it is a great program. I haven't had the time or desire to research and review its current status, and its terrible to learn that those that are using it irresponsibly could potentially ruin for people like myself.
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      11-18-2012, 02:55 PM   #175
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This thread has had some activity! From what media artist has said, it seems that the program has been taken advantage of. I am thankful for the program. I feel I used the program responsibly and with out it, I would not have passed the 1 year mark of home ownership. Instead, it would have been a lost opportunity and I would have shelled out another $13,200 to a crappy landlord.

If used as intended and responsibly, it is a great program. I haven't had the time or desire to research and review its current status, and its terrible to learn that those that are using it irresponsibly could potentially ruin for people like myself.
The amount of irresponsible FHA users >>>>>>>>> The amount of responsible FHA users.

Unfortunately.
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      11-18-2012, 02:57 PM   #176
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didn't read the thread, but the loan process definitely sucks now.

in '04 i got in with a sizeable down, good credit, and no job. on the way out now, got tired of the area and i have something better and free here.

the entire credit system gets on my nerves. i live my life $100 at a time, and the way i do it, it goes pretty far lol. cracked the last 100 on wednesday i think, still have 20

kinda unrealistic for most, but i think the best way is to save up, live frugally, and just get into something very modest (and pay it in cash!)
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