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To me it seems as though requiring 20% down will keep a lot of people from buying a home. A lot of people are capable of paying for their mortgage, but find it very difficult to come up with 20% without having to move in with the parents in order to save up.
Banks got burned by mortgagees walking away from houses in which they had put down a paltry sum of money. I think this is a bit of stretch though, asking for 20%.
I'd like to believe that people that can sock away 20% are probably financially stable individuals and most likely would not default on their loan. But, I think that would cause a bigger crash than we've seen so far. I don't even think there are enough wealthy people out there who could buy up all of these homes just to rent.
So, good news is... home prices might fall far. Instead of needing 5% of 300000 (15k) you may need 20% of 200k (40k). Still a lot of cash. But let's face it. Home costs break the backs of most Americans. If Americans had to save up 20% first, their mortgages would be much tinier and more affordable.
I don't think this'll happen though. They'll ask for higher downpayments, but not 20%.
Banks got burned by mortgagees walking away from houses in which they had put down a paltry sum of money. I think this is a bit of stretch though, asking for 20%.
I'd like to believe that people that can sock away 20% are probably financially stable individuals and most likely would not default on their loan. But, I think that would cause a bigger crash than we've seen so far. I don't even think there are enough wealthy people out there who could buy up all of these homes just to rent.
So, good news is... home prices might fall far. Instead of needing 5% of 300000 (15k) you may need 20% of 200k (40k). Still a lot of cash. But let's face it. Home costs break the backs of most Americans. If Americans had to save up 20% first, their mortgages would be much tinier and more affordable.
I don't think this'll happen though. They'll ask for higher downpayments, but not 20%.
I think these people would have walked regardless. There are quite a few strategic walk aways going on now and some of these people put money down on their houses, but they are so upside down that they would rather walk than keep paying for a loan worth lets say 300K when the house is worth half that.
I think these people would have walked regardless. There are quite a few strategic walk aways going on now and some of these people put money down on their houses, but they are so upside down that they would rather walk than keep paying for a loan worth lets say 300K when the house is worth half that.
In this downturn, yes I can see someone with 20% down losing it all. However, I feel a little doubtful that home prices would drop another 20%. Its not too strategic to walk away IF you still have equity.
I'd like to believe that people that can sock away
20% are probably financially stable individuals
I agree. I posted that one time and someone came back with a bunch of anecdotal examples
of people taking HELOC's from additional properties that they held to come up with the 20%.
Nope. A 20% "down-payer" is a heck of a lot better risk than a 2% "down-payer."
Quote:
Originally Posted by dspguy
I feel a little doubtful that home prices would drop another 20%.
I don't agree with this.
In many cities, after the price dropped 20% many people said that they
were "doubtful that home prices would drop another 20%." Then they did.
Prices won't drop that much everywhere.
On average though, I think 20%+ will happen.
Of course, that's just you and me posting our opinions.
What was it that is said about opinions ...... ?
QRM was part of the financial overhaul with serious holes and if you think it should happen, then I'm glan you don't care if you lose another 50+% value in your home. If this happens, there are strict guidelines for banks that lend with less than 20% down.......this will drive rates way up. Also, if this happens, the buyer pools shrink by 80% (okay, I don't know the actual number, but it will be huge). This will also drive the rates up in a big way. Finally, throw in inflation, which will catch up to us to take rates up even further. How high do you think the rates will go and the values go down?
VA, a no money down program has the lowest track record of all loan programs of foreclosures. It's not the down payment that's causing the defaults. Do you think that they have the TOUGHEST appraisal standard out there from any other loan program - that may have something to do with it?
20% always used to be the standard. Don't see a big deal in going back to it. Home prices may slip a bit more, but people will just have to come up with that down payment money like they used to. If that keeps a higher percentage of people from defaulting, I don't see why that's a bad thing.
Homes may continue to drop in price, but with interest rates being what they are, FHA still in place and lenders still allowing 30 year mortgages.... now may be one of the most affordable times to buy... even if you home does drop some in value. Let's say home values drop but interest rates spike up to 6% - 7%..... It's all speculation.
I just put an offer on a house. It's a fixer, if prices do continue to drop hopefully the sweat equity I put into it will even things out. This house is expected to be my home for the next 20 years.
In one of the countries I used to live in it's standard to borrow 110% of the cost of the home (the buyer pays costs which are usually around 10%), but there's no such thing as a short sale and you can't discharge debt even in a bankruptcy, only restructure. Guess how their housing market is doing? Just fine. They are more concerned with whether you can afford the payments than how much you are putting down.
The problem is not 'skin in the game' - it's affordability, and the ease with which people can walk away here.
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