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That's odd. I just typed in that yearly income into the Zillow mortgage affordability calculator and it says a person could only afford a 208,000 dollar mortgage with no other debts.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by rugrats2001
So if a home buyer puts down $30,000 on a house and the economy falls apart again and their house drops $50,000 in value it's a travesty, but if they had put $60,000 down it's somehow better?
How is it better for the consumer to lose $50,000 than $30,000?
Which banks do you own shares of, exactly?
I would suggest that it is better, because their payment is that much lower. That is, if they want to stay in that house. They will be better able to wait out the recession until it gets back up again. In this last recession, ours went down from $675k to $400k from 2006-2009, but was back above the 2006 level by 2016. The problem is worse for people that like to move around a lot, and try to move before they have that equity back.
Except it doesn't. Increasing the price of housing in an area does NOT increase one's ability to carry that debt load.
This is just more bubble-nomics. Housing is expensive (to the point of almost surely being overpriced), so that means people "need" to spend more. Except they can't really spend more without putting themselves in a dangerous financial situation.
So if a home buyer puts down $30,000 on a house and the economy falls apart again and their house drops $50,000 in value it's a travesty, but if they had put $60,000 down it's somehow better?
How is it better for the consumer to lose $50,000 than $30,000?
Which banks do you own shares of, exactly?
I agree that you don't "need" to have 20% down to buy, but you're using a bad example. If you put down $60,000 and the value drops $50,000, you can still sell without bringing money to the table. If you only put down $30,000 you're either bringing money to the table or doing a short sale.
That's odd. I just typed in that yearly income into the Zillow mortgage affordability calculator and it says a person could only afford a 208,000 dollar mortgage with no other debts.
That says it is what would "fit comfortably in your budget."
This is faulty arithmetic/accounting. You lose the same amount either way if you sell at the new value (current sales price - your buying price (and closing costs, etc.)). Why is it better or worse to "bring money to the table" versus paying the same amount as part of a bigger down payment?
Maybe this example makes it clearer. I'll leave closing costs out of it to keep it simple. You have $80000 in your savings account on 1/1/15 and close on a house on 1/15/15 that cost $300000. You put down $60000 and move in. You have $20000 left in your savings account. You have a mortgage of $240000.
On 1/15/18 you want to sell. The market value of your house has dropped by $50000 and you sell for $250000. You have lost $50000. You still have $20000 in your savings account, plus you have $10000 realized on the sale ($250000-$240000 mortgage).
Or, you could have put down $25000 and kept $55000 in your savings account in 2015, taking a mortgage for $275000. On 1/15/18 if you sell for $250000, you have lost the down payment if $25000 plus you have to take $25000 out of your savings account to bring to closing, leaving you with $30000 in your savings account--the same as the other scenario's $20000 plus $10000.
It makes no difference in determining the loss whether you paid all of the loss from your savings account in 2015 versus paying part of it then and part of it now. The loss is $50000 either way. Whether you find one scenario better than another from a psychological standpoint is up to you.
This is faulty arithmetic/accounting. You lose the same amount either way if you sell at the new value (current sales price - your buying price (and closing costs, etc.)). Why is it better or worse to "bring money to the table" versus paying the same amount as part of a bigger down payment?
Maybe this example makes it clearer. I'll leave closing costs out of it to keep it simple. You have $80000 in your savings account on 1/1/15 and close on a house on 1/15/15 that cost $300000. You put down $60000 and move in. You have $20000 left in your savings account. You have a mortgage of $240000.
On 1/15/18 you want to sell. The market value of your house has dropped by $50000 and you sell for $250000. You have lost $50000. You still have $20000 in your savings account, plus you have $10000 realized on the sale ($250000-$240000 mortgage).
Or, you could have put down $25000 and kept $55000 in your savings account in 2015, taking a mortgage for $275000. On 1/15/18 if you sell for $250000, you have lost the down payment if $25000 plus you have to take $25000 out of your savings account to bring to closing, leaving you with $30000 in your savings account--the same as the other scenario's $20000 plus $10000.
It makes no difference in determining the loss whether you paid all of the loss from your savings account in 2015 versus paying part of it then and part of it now. The loss is $50000 either way. Whether you find one scenario better than another from a psychological standpoint is up to you.
I hear you, but I think the assumption is that most (no, not all) people putting down less than 10% probably don't have $80,000 in their savings account.
I hear you, but I think the assumption is that most (no, not all) people putting down less than 10% probably don't have $80,000 in their savings account.
Well... Somebody does cause these homes are getting sold rather quickly.
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