59% of mortgages today are back by taxpayers (VA, USDA, FHA) with less than 3.5% downpayments (loan, fixed rates)

[aneftp]

59% of Home Buyers Rely on Low Down-Payment Government Mortgages | RISMedia

If you add in the $8K tax credit for first time homeowners/and or those who haven't owned home in the past 3 years, people aren't putting down much money at all.

Already taxpayers are on the hook for Freddie/Fannie.

The default rates on the government backed loans are just as bad as the regular conventional loans.

It's scary how much future liability the US taxpayers are on the hook for with these mortgages. Most of these government backed loan programs let people obtain the loan with less than stellar credit scores (aka those less than 650). Sure they require lots of documents, but still you are exposing the US taxpayers to the not most credit worthy borrowers who have very little skin in the game (very or no downpayment PLUS giving them a $8K first time homeowners tax credit).

In business classes during college, I was taught mortgage lending was an extremely profitable business to be in when it involves those with the best credit scores and significant downpayments.

Looks like the government didn't attend business 101 classes. Why subject US taxpayers to the bottom feeders of the credit score chain in addition to not requiring a significant down-payment? How is the government supposed to raise revenue with these loan programs? Looks like a money losing deal for the taxpayers if these loans go bad (and you know millions have already).

[sonarrat]

FHA financing was always a good option for the more conservative bottom-feeders.. low down and fairly good fixed rates even with poor credit. The problem was that the other lenders undercut their rates, offering no down and exotic terms with no credit check.. those kinds of loans are now a bad memory, and now FHA is genuinely the best deal out there.

But the real damage those exotic products did to the economy was in destroying the incentive to save up and bring a large down payment to the table. If you could buy a house with no out of pocket expense, then why save? That's why you're seeing so many of the government-backed loans now. The number of people with six-digit bank balances that are ready to sign them away on homes is pretty limited.

[homeowner35]

Originally Posted by sonarrat

FHA financing was always a good option for the more conservative bottom-feeders.. low down and fairly good fixed rates even with poor credit. The problem was that the other lenders undercut their rates, offering no down and exotic terms with no credit check.. those kinds of loans are now a bad memory, and now FHA is genuinely the best deal out there.

But the real damage those exotic products did to the economy was in destroying the incentive to save up and bring a large down payment to the table. If you could buy a house with no out of pocket expense, then why save? That's why you're seeing so many of the government-backed loans now. The number of people with six-digit bank balances that are ready to sign them away on homes is pretty limited.

Good post. It was the exotic products that got us in to the mess.

[Engineer3D]

Well I guess as a State and Federal Tax Payer, I would be considered a bottom-feeder.
So being a Disabled Veteran, using the VA Loan Guaranty as a backing to a regular mortgage makes me a even lower degenerate bottom feeder.


I just hope the rate I am getting locked in at (4.5% 30yr Fixed BOA) and Credit Score (640) doesn't make me into a deadbeat mortgage holder that it seems I have already been labeled as.