[momentum]

if you are on this forum and drive at lease a BMW, you have nothing to worry about....

[momentum]

a loan does days were EASY....no job needed, no doc, just a credit score.... U could get a loan for a dead guy or a bum

[kevinbahnz]

Originally Posted by momentum

a loan does days were EASY....no job needed, no doc, just a credit score.... U could get a loan for a dead guy or a bum

thats where the problem was. and I've seen it happen. People selling their SS # numbers for $5-$10k to agents/brokers to flip a house.

[48Laws]

[QUOTE=MediaArtist;12351096]You mean ignore facts that your advice about low down payments is horrible? Okay, let's ignore the fact that your advice would leave people 4x more likely to default than someone who follows my advice and address your "clear points".

[quote]

I don't recall asking you a question but, since you feel compelled to speak on his behalf, I'll play...

First of all, I said put as little down as possible. In most cases, that qualifies as a 3.5% for FHA. Your 20% down-payment, as was said recently, is for your parent's generation who intended to live and die in the first house they bought. People move way more frequently nowadays. Career change rapidly. Economies dry up. Save your damn cash and work the system. Putting little down does not imply one is being financially irresponsible. What works for you may not work for them. It will take some years to save 20% on a home. Should they miss an opportunity to buy low just because of some outdated rule you live by? But again, everyone on this site dates super models and runs the top hedge fund. I love the ideal internet world.

Because you posted an article from 2009, this point is no longer valid.

The year is irrelevant because the principle of what was being said are the same. Cash in-hand is always the best route.

Here's 2011. Happy?

Remember the Red Queen’s warning to Alice? “It takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast.”

That must be what it feels like to be saving up for a down payment on a home these days. Washington policymakers are entertaining several proposals that would raise the minimum down payment required for loans backed by Fannie Mae and Freddie Mac. Lenders are raising their own minimum cash requirements — the average down payment on new loans for home purchases is now around 27 percent, according to the Mortgage Bankers Association of America. Meanwhile, the Federal Housing Administration, the chief source of low down payment loans, is raising the fees it charges folks who only have minimal amounts of cash to the table.

Trying to save just the standard 20 percent? That could take you 14 years if you’re an average middle-class family looking for an average middle-class house, the Center for Responsible Lending reported recently. If you save $250 a month, it would take nine years to save a 10 percent down payment and six years to save a five percent down payment.

And that doesn’t seem to pay. If you think about the cost of paying rent for five or more years, you may be better off jumping into a home with a low down payment now. That’s true even if you have to spend more money on fees and mortgage insurance to get one of those low down payment loans. While nobody can predict interest rates with certainty, it seems unlikely that the mortgage terms you’d face down the road would be as favorable as they are now, with the Federal Reserve holding short term rates close to zero, and the government still backing loans via Fannie Mae and Freddie Mac.

Even if you have the money for a bigger down payment, there can be good reasons to save your cash. Mortgage rates continue to skirt all-time lows: Why not put your money to work for yourself and borrow as much as you can reasonably afford, on a monthly basis, at today’s rates? You can put the money you’re not paying into a down payment to work elsewhere. If home values rise, you will have done your best to leverage a small down payment into bigger equity. If they fall, you’ll have less skin in the game, and that could put more pressure on your banker to improve your loan terms lest you walk away.

The most popular source of low-down payment loans is the Federal Housing Authority, which backs loans that cover as much as 96.5 percent of a home’s value. To get one of those 3.5 percent down payment loans, though, borrowers have to pay one percent up front and annual mortgage insurance premiums. Beginning on April 18, those premiums will rise 0.25 percentage points, to 1.1 percent for borrowers who put at least five percent down, and to 1.15 percent for borrowers who only put 3.5 percent down.

That may seem like a big price to pay, but the FHA plan buys you a couple of advantages. An FHA loan may get you into the house years earlier, while rates and housing prices are low. And the actual mortgage rates for FHA loans are lower than traditional loans. Consider these figures calculated by Keith Gumbinger of HSH.com, a mortgage research firm, on the purchase of a $250,000 home:

* With a 3.5 percent down payment, you’ll need $8,750 in cash for the down payment plus $2,412 for the initial buy-in fee. At 4.87 percent interest, your monthly payment would be $1277 $1,507.

* With a five percent down payment, you’ll need $12,500 for the down payment and $2,375 for the buy-in fee. At 4.87 percent, your monthly payment would be $1,474. You’d need $3,713 more up front than with the 3.5 percent loan, and you’d pay just $33 a month less. It would take more than nine years of lower payments to make up for that $3,713.

* With a 20 percent down payment, you’ll need $50,000 for the down payment. There would be no upfront fee and no monthly insurance premium. But your rate would be higher, at 5.01 percent, based on today’s averages. Your monthly payment would be $1,075 — $399 less than the five percent loan and $432 less than the 3.5 percent loan. You’d have to save an additional $37,500 (how long would that take?), and it would take more than seven years of those lower mortgage payments to catch up.

It looks like the less you put down, the better off you are. And if that extra monthly payment really starts to annoy you after seven or nine years, you can always refinance. With all of your payments and a little good luck in your market, you’ll have enough equity to avoid the mortgage insurance by then.

Source: http://blogs.reuters.com/reuters-mon...ayment-sucker/

The lowest FHA rate as of 7/18/12 can offer for a 30 year fixed is: 3.791%
The lowest conventional 30 year fixed is: 3.673%


When you go 15 year fixed it gets even worse, FHA: 3.433%, Conventional: 3.091%

So basically, your advice is based on an outdated faulty premise. I think the only "clear" point here is that your advice is horrible.

Yet, you buy equity at your own expense (20% + down) on a house (liability) that may be overvalued and probably is in this market. LOL! Bad advice? That's like the people who put huge down payments on cars (Liability) to avoid bigger car notes. Robbing peter to pay paul.

BTW, saving cash and using someone else's money to benefit you is not an outdated premise. And 3 years is not outdated unless you're talking about iPhones. The interest rates are at their lowest in 2012, so if their idea ran true in 2009, common sense would tell you it's even more favorable now.

[quote]
Now why don't you address the fact that lower down payments (like you're suggesting) lead to higher rates of default?


Ironically, my 2009 article is "outdated" yet you want me to examine a graph from a blog, no less, that goes back to 2002, absent of any actual formulas, but plastered with charts.

If you've been paying attention FHA loans AND conventional loans have revamped the lending methods and the requirements are far tighter than your "outdated" blog chart. During that period, predatory lending was in full affect, so it doesn't take a scientist to understand why FHA loans default at a higher rate. They were approving $500K homes to people earning $40K/year. If you really want to see the benefits of lower down payments using any of these loans, you would need data for the next 10 years.

In fact, I know you can't answer it, so let's try something you will understand. Why don't we have a gentleman's bet to settle this issue? Let's say a small amount of $1,000. I'll bet you that FHA delinquency will rise in the next 3 months, because low down payment financing, and a system based on it, simply doesn't work. So by October 18th, 2012 (or so), I will bet you $1,000 that FHA delinquency will rise, rather than go lower. If what you're saying is true, that low down payments work, you should take my $1,000 without much effort. If however delinquency does rise (anything above a 0% increase), then you owe me $1,000. We can have a moderator hold the checks, or do donations to our favorite non-profit.

Are you game?

How about we put on boxing gloves and the best boxer's point wins? Are you game? Sounds about as juvenile as your attempt to be self-important on the internet, doesn't it?

$1000? What a character. Is that how you play a big wig online? You're really feeling yourself. Like seriously. As I said, predatory lending and shady underwriting during the boom of FHA loans is the chief cause of defaults. During this period, this loan type was most attractive to buyers and saturated the lending market, hence the reason for what we see today. But this topic is a small caveat to the bigger point, which was, 20% down is not necessarily the best formula for attaining a home in 2012. Capitalizing on low interest rates now, or miss it by saving is a choice that shouldn't be that difficult.

[ABQ325i]

Originally Posted by momentum

a loan does days were EASY.

I have no idea what this means

What is a does day loan?? Department Of E... S.... ???

[AllBlackBimmer]

OP HERE AGAIN.

This thread has taken on a life of it's own. haha. I do appercaite all the info, but can we get back on topic?

The debate on 20% or not is great... BUT.. I see it as this...

I am pretty sure I will NOT be putting 20% down. There. End of story.

sure I agree 20% is great... if you have it.

Now, unless you are an IDIOT, I think everyone on here understands differences in market, region, situations, etc and what is best for one person is not always best for another. Sure if you make 120k a year, putting 20% down and having emergency funds probably isn't a problem, but I am not in that case.

Once again, I am 26. I will be living at whatever home I buy for poteintially 5-10 years at a maximum. I do not need that 4 car garage, white picket fence house as my first house either.

I am NOT going to "stretch" myself or "overspend"... I am not stupid and know that I cannot afford a 250k house, even if it was my dream house.

I live in Pennsylvania... if that makes any difference.

I am looking for guidence, help, tips, and thoughts on MY situation. It is cool to start a thread so many find interesting enough to post in... but this is NOT A GENERAL REAL ESTATE THREAD. ... I am trying to find help for my situtation. I understand people get way off topic by posting one comment, that leads to another, but I did not intend to start an all out real estate debate.

I thank everyone for their information and please keep it coming -- esp to you knowledgable ones - the agents, brokers, and everyone else that is in the business.

I am going to look into FHA... so those of you that think this is a bad idea, please chime in why this is a bad idea in MY SITUATION.

THANKS!!

[lucas.kent]

I can't believe this thread is 3 pages long. It really has taken on a life of its own! Good advice here, and an interesting debate - no doubt!

[S_M]

Originally Posted by AllBlackBimmer

OP HERE AGAIN.

This thread has taken on a life of it's own. haha. I do appercaite all the info, but can we get back on topic?

The debate on 20% or not is great... BUT.. I see it as this...

I am pretty sure I will NOT be putting 20% down. There. End of story.

sure I agree 20% is great... if you have it.

Now, unless you are an IDIOT, I think everyone on here understands differences in market, region, situations, etc and what is best for one person is not always best for another. Sure if you make 120k a year, putting 20% down and having emergency funds probably isn't a problem, but I am not in that case.

Once again, I am 26. I will be living at whatever home I buy for poteintially 5-10 years at a maximum. I do not need that 4 car garage, white picket fence house as my first house either.

I am NOT going to "stretch" myself or "overspend"... I am not stupid and know that I cannot afford a 250k house, even if it was my dream house.

I live in Pennsylvania... if that makes any difference.

I am looking for guidence, help, tips, and thoughts on MY situation. It is cool to start a thread so many find interesting enough to post in... but this is NOT A GENERAL REAL ESTATE THREAD. ... I am trying to find help for my situtation. I understand people get way off topic by posting one comment, that leads to another, but I did not intend to start an all out real estate debate.

I thank everyone for their information and please keep it coming -- esp to you knowledgable ones - the agents, brokers, and everyone else that is in the business.

I am going to look into FHA... so those of you that think this is a bad idea, please chime in why this is a bad idea in MY SITUATION.

THANKS!!

I think the FHA loan is risky in your current situtation. You have less than your 20% down liquid, a decent size liability (car loan), and are only putting 3% down on a home that could easily lose 3% of its value in a short period, leaving you negative equity on the home. Overall that would give you very little, or negative net worth.

[AllBlackBimmer]

Originally Posted by smohr33

I think the FHA loan is risky in your current situtation. You have less than your 20% down liquid, a decent size liability (car loan), and are only putting 3% down on a home that could easily lose 3% of its value in a short period, leaving you negative equity on the home. Overall that would give you very little, or negative net worth.

Just because I am not putting 20% down, doesn't mean I will not have some liquid funds. I do intend on the "9 months of morgage payments" for emergency funds...

On my car loan I have about 12k-13k left? My car is probably 60-65% paid off.

And just because I do an FHA - doesn't mean I can't put MORE down than the 3%....

I mean, I might be able to put 7-8% down, just not the whole 20%... you follow?

thakns for the input and I do realize it is a little risky...

[S_M]

Originally Posted by AllBlackBimmer

Just because I am not putting 20% down, doesn't mean I will not have some liquid funds. I do intend on the "9 months of morgage payments" for emergency funds...

On my car loan I have about 12k-13k left? My car is probably 60-65% paid off.

And just because I do an FHA - doesn't mean I can't put MORE down than the 3%....

I mean, I might be able to put 7-8% down, just not the whole 20%... you follow?

thakns for the input and I do realize it is a little risky...

Understood, I don't know you're exact situation. I think you have the right idea

[JasonCSU]

Originally Posted by MediaArtist

You mean ignore facts that your advice about low down payments is horrible? Okay, let's ignore the fact that your advice would leave people 4x more likely to default than someone who follows my advice and address your "clear points".

So basically, your advice is based on an outdated faulty premise. I think the only "clear" point here is that your advice is horrible.

It's still not horrible advice overall, but I think a couple things need to be specified. I don't disagree with the data from the last 10 years showing more delinquency on loans with less than 20% down, but how does that automatically make someone 4 times more likely to default if they do put less than 20% down? Like I said in my previous example, someone could have the full 20%, though only put 10% down to keep the other 10% on hand. In that example, you would have money for emergencies and could pay additional principal every month from it if you so chose. Why is this a bad idea? Over the last 10 years that data represents, many people were approved for loans who never should of had them to begin with. My guess is many of those delinquencies were from people who put the minimum 3.5% down, but had no other liquid assets outside of that 3.5%. In a case like that, I agree it would be a bad idea to purchase a house. Also, what is the ratio of loans with less than 20% to those with 20% or greater? Basically what I'm trying to say:

Putting down the minimum 3.5% and having no other liquid assets available = a bad idea

Putting down less than 20% but still having liquid assets available = not necessarily a bad idea, and depends on your situation

Now, I know you said before that one should save the 20% plus additional cash. This may work fine for someone who is making a great salary, but what about people at the median household income level (around $50,000 I think)? How long will it take to save up that kind of money? During that time while saving, they are also throwing away money on rent while home prices and interest rates may be rising. It may be an unrealistic expectation for a lot of people to save that kind of money.

[JasonCSU]

Originally Posted by AllBlackBimmer

OP HERE AGAIN.

This thread has taken on a life of it's own. haha. I do appercaite all the info, but can we get back on topic?

I am going to look into FHA... so those of you that think this is a bad idea, please chime in why this is a bad idea in MY SITUATION.

Sorry about that. One thing to keep in mind about the FHA loans is that they require the PMI be paid for at least 5 years even if you reach 20% equity or pay 20% of it off before that time.

[MediaArtist]

Originally Posted by 48Laws

As I said, predatory lending and shady underwriting during the boom of FHA loans is the chief cause of defaults.

Gee, that sounds familiar. That sounds like what private banks did during 2001-2007.

It's fun when someone argues your point for you unknowingly.

[MediaArtist]

Originally Posted by JasonCSU

I don't disagree with the data from the last 10 years showing more delinquency on loans with less than 20% down, but how does that automatically make someone 4 times more likely to default if they do put less than 20% down? Like I said in my previous example, someone could have the full 20%, though only put 10% down to keep the other 10% on hand.

I think the real point is that the stats/facts show that people who put low down payments, or don't have enough for 20% down and reserves tend to let their notes become delinquent at a higher rate.

Sure, there could be someone who puts 5% down, and then takes his other money and invest it elsewhere, and is perfectly fine. But that's simply anecdotal, the statistics show the opposite happens more often than not. I'm not someone who makes conclusions based on someone on the internet saying "it can work!", I want to see proof in the form of reliable and trustworthy statistics, and guess what? Those statistics shows that low down payment loans default at a very high rate.

It's one of the reasons I was able to predict FHA would be in trouble last year, and it's one of the reasons I know FHA delinquency will continue to rise.

[MisterSkiMask]

Originally Posted by MediaArtist

I think the real point is that the stats/facts show that people who put low down payments, or don't have enough for 20% down and reserves tend to let their notes become delinquent at a higher rate.

Sure, there could be someone who puts 5% down, and then takes his other money and invest it elsewhere, and is perfectly fine. But that's simply anecdotal, the statistics show the opposite happens more often than not. I'm not someone who makes conclusions based on someone on the internet saying "it can work!", I want to see proof in the form of reliable and trustworthy statistics, and guess what? Those statistics shows that low down payment loans default at a very high rate.

It's one of the reasons I was able to predict FHA would be in trouble last year, and it's one of the reasons I know FHA delinquency will continue to rise.

Let’s not ignore the fact that amateur real estate investors skewed the data, buying multiple houses at a time with little to nothing down and, ultimately, defaulting on many loans each.

[f30nynj]

Originally Posted by MediaArtist

Not a good market to be buying IMO, even with low rates.

The housing market is down and prices are low(if not lowest). If you are talkign about the economic conditions in general then I agree. But it has always been inversely proportional to buying a house.

I am saving for downpayment to buy one next year and I've been researching for last 2 years. I had other commitments like education loans etc which I cleared off. Now in market.

[xtac]

kinda off topic, but anyone know if anyone still does stated income or asset based mortgages?

[tmppgh]

Am I the only one here that thinks 2-2.5 of your income is high for a price. When I bought my house I would have never spent that much. I like having a payment that is low in case anything bad ever happens (layoff, illness, etc.). It is comforting knowing that I will always be able to afford to shelter my family even under bad circumstances.

[xtac]

Originally Posted by tmppgh

Am I the only one here that thinks 2-2.5 of your income is high for a price. When I bought my house I would have never spent that much. I like having a payment that is low in case anything bad ever happens (layoff, illness, etc.). It is comforting knowing that I will always be able to afford to shelter my family even under bad circumstances.

Depends on location, but yes under most conservative backends you shouldn't be able to afford anything more than that.

[MediaArtist]

Originally Posted by MisterSkiMask

Let’s not ignore the fact that amateur real estate investors skewed the data, buying multiple houses at a time with little to nothing down and, ultimately, defaulting on many loans each.

That is partially true. Many of those "amateur investors" were smoked out during the subprime crash, so it's not clear that they were using FHA after the crash (or if they could even qualify for another loan at all in such a short period of time).

FHA became the "new subprime" when private banking stopped doing those loans in 2007-2008. It just makes sense to me that the institution, in this case FHA, with the lowest underwriting standards, would have the highest default rate, but that's just me.

[MediaArtist]

Originally Posted by capriguy84

The housing market is down and prices are low(if not lowest). If you are talkign about the economic conditions in general then I agree. But it has always been inversely proportional to buying a house.

I am saving for downpayment to buy one next year and I've been researching for last 2 years. I had other commitments like education loans etc which I cleared off. Now in market.

High unemployment.
Stagnant wages.
Poor hiring forecast.
High amount of distressed homeowners (NOD/Underwater/etc). Some people call this "shadow inventory"
Artificially low inventory (MLS/Listed)
Median housing prices in nicer areas of the country are still 5x-10x the median income.

Also, this latest bombshell from the HELOC market:

Ten days ago, the Office of the Comptroller of the Currency published some frightening figures about the looming payments. In its spring 2012 “Semiannual Risk Perspective,” it said that almost 60 percent of all home equity line balances would start requiring payments of both principal and interest between 2014 and 2017.

The amounts owed in these lines of credit climb significantly in coming years. While $11 billion in home equity lines are starting to require principal and interest payments this year, the amount jumps to $29 billion by 2014, the office said. That is followed by a surge to $53 billion in 2015 and $73 billion in 2017. For 2018 and beyond, it’s $111 billion.

... anyone else think that's going to cause defaults to surge?

Add the fact that the U.S will probably be in another recession within the next 6 months.. to me, it seems like a very poor decision to buy a house right now unless you feel absolutely confident of your employment, and financial situation for the next decade or so. Otherwise, there is time to wait.

[Z3->WRX->335]

Well I can probably help you out OP. I bought a house in PA last year, I was 24.

1.) Go get your pre-approval letter and start looking.

2.) My house cost HALF of what I was pre-approved for.

3.) It's good to have that 9 months worth of payments saved. If you own the place you're obviously responsible for unforseen repairs.

4.) You can put a LOT of money into a house very quickly...doing work yourself can probaly save you at least 50% though

5.) One thing I undervalued is a nice sized backyard with privacy. Fortunatley, I ended up with a 6' high privacy fence and a nice sized yard...I'm just saying I didn't realize how much I like it till I moved in.

6.) Realtors can get annoying fast but just remember they're the ones working for you

7.) Don't make any major purchases with credit between the time you're pre-approved and the time you close. THey will keep checking your shit until the day you sign all the papers.

8.) Obviously putting 20% down is great but I didn't...

9.) In the end it's nice not having to deal with a landlord and to know that your money is going towards something

10.) The whole process actually kind of sucked haha. There was such a big weight off my shoulders after signing the papers