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Old 06-15-2018, 09:23 AM
 
828 posts, read 966,215 times
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Quote:
Originally Posted by oldtrader View Post
It seems that a lot of people on this thread do not understand why a lot of people will take a no money down, instead of having to come up with 20 % down. Lets look at some of the reasons.

They can buy their home with a payment they can afford with no money down. They have $200,000 in the bank and could have an 80% loan with no problem, and can afford to make the payments without strain. Instead they choose a no money down loan, with low interest rate.

Reason to go this path: Their money can bring them in a better return on their money than the
interest rate they are paying. They come out money ahead, this way. A good investment.
Whoa...someone on C-D with critical thinking skills! What many people also seem to miss are that these loans come with other restrictions beyond just income levels. Such as the USDA loans can't be used for homes within large cities or suburban areas. They really are just for rural properties...the same kind of properties that people are leaving in mass quantities to be closer to the city.

Another example, though not directly related to homes/mortgages. Last year, I bought a 3 year old Chevrolet Volt, with 30K miles on it, to replace a 2005 Dodge Ram truck with 150K miles on it. The truck was about due for some serious money infusion on repairs. I was driving 80-100 miles a day, round trip, just on commuting miles. I took a 6 year loan on it. Yes, on a 3 year old car. 3.5% interest rate. I have several other investments pulling higher returns than that. The payment + insurance cost increase, and the minuscule amount of money that my electric bill increased to charge it at night, was still less than the cost of fuel alone that I was feeding into the truck, and I was putting a very insignificant amount of gas into the Volt due to it being essentially an electric car.

Under normal situations, a 6 year loan on _any_ car is a foolish plan, more so on a used car. But I was money ahead the moment I signed on the dotted line, and will continue to be more money ahead as the cost of fuel continues to rise. I see no reason the car wouldn't make it to 200K miles, and even if I drop it off at the scrap yard the day I make the last payment on it, I'm still money ahead over the prior 6 years.

Sure, I could have paid cash for the car. Or taken a 3 year loan, and paid less overall in interest. But then I'd also have lost out on interest from the other investments. So end result, I would have less net worth.
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Old 06-15-2018, 11:32 AM
 
5,091 posts, read 6,262,196 times
Reputation: 7858
Quote:
Originally Posted by urbex View Post
Whoa...someone on C-D with critical thinking skills! What many people also seem to miss are that these loans come with other restrictions beyond just income levels. Such as the USDA loans can't be used for homes within large cities or suburban areas. They really are just for rural properties...the same kind of properties that people are leaving in mass quantities to be closer to the city.

Another example, though not directly related to homes/mortgages. Last year, I bought a 3 year old Chevrolet Volt, with 30K miles on it, to replace a 2005 Dodge Ram truck with 150K miles on it. The truck was about due for some serious money infusion on repairs. I was driving 80-100 miles a day, round trip, just on commuting miles. I took a 6 year loan on it. Yes, on a 3 year old car. 3.5% interest rate. I have several other investments pulling higher returns than that. The payment + insurance cost increase, and the minuscule amount of money that my electric bill increased to charge it at night, was still less than the cost of fuel alone that I was feeding into the truck, and I was putting a very insignificant amount of gas into the Volt due to it being essentially an electric car.

Under normal situations, a 6 year loan on _any_ car is a foolish plan, more so on a used car. But I was money ahead the moment I signed on the dotted line, and will continue to be more money ahead as the cost of fuel continues to rise. I see no reason the car wouldn't make it to 200K miles, and even if I drop it off at the scrap yard the day I make the last payment on it, I'm still money ahead over the prior 6 years.

Sure, I could have paid cash for the car. Or taken a 3 year loan, and paid less overall in interest. But then I'd also have lost out on interest from the other investments. So end result, I would have less net worth.
It can make sense in some instances. But someone with $200K in the bank is probably not going to qualify for a USDA loan.

I know someone who just closed on their house a few weeks ago. USDA loan. 0% down. It's in suburban Austin, NOT a rural area. Although I am happy for them, I still feel that it was very, very risky. There is a reason they didn't have any money for a down payment. They are financially illiterate. They don't make much to begin with, barely make their rent payment every month, have very little to no savings, and just bought a house. Their monthly mortgage/insurance/tax payment is quite a bit more than their rent was. They have no way to pay for a major repair (roof replacements for hail damage are very common here and a real possibility), they have no medical insurance, routinely let their car insurance lapse, etc. So they are one job loss, injury, illness, storm, or accident away from homeless. I still have no idea how they got approved for a loan. Their credit is marginal as well, for good reason.
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Old 06-15-2018, 12:57 PM
 
828 posts, read 966,215 times
Reputation: 1690
Quote:
Originally Posted by CarnivalGal View Post
It can make sense in some instances. But someone with $200K in the bank is probably not going to qualify for a USDA loan.

I know someone who just closed on their house a few weeks ago. USDA loan. 0% down. It's in suburban Austin, NOT a rural area. Although I am happy for them, I still feel that it was very, very risky. There is a reason they didn't have any money for a down payment. They are financially illiterate. They don't make much to begin with, barely make their rent payment every month, have very little to no savings, and just bought a house. Their monthly mortgage/insurance/tax payment is quite a bit more than their rent was. They have no way to pay for a major repair (roof replacements for hail damage are very common here and a real possibility), they have no medical insurance, routinely let their car insurance lapse, etc. So they are one job loss, injury, illness, storm, or accident away from homeless. I still have no idea how they got approved for a loan. Their credit is marginal as well, for good reason.
Given that logic, NO ONE, EVER, should get a mortgage loan, because some people aren't responsible?
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Old 06-15-2018, 03:35 PM
 
Location: Raleigh NC
7,869 posts, read 6,202,654 times
Reputation: 6983
Who are these people that tell you every bit of their business?
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Old 06-15-2018, 04:02 PM
 
Location: Cary, NC
31,716 posts, read 55,574,517 times
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Closed a VA loan purchase today.
100% funding.
Buyer had about $2500 on the table for a $180,000 buy.
Then he picked up a $536 credit from the sellers, too.
Walked away from closing with a $1200 check.

He can afford the house.
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Old 06-15-2018, 05:52 PM
 
239 posts, read 72,664 times
Reputation: 171
Quote:
Originally Posted by desperatedogadvice View Post
We have been lucky with real estate sales. Multiple offers on every home we have ever sold in quick turn around of listing. And as this is the case, we have our pick of buyers. We always look for (in order of preference) 1) full price or over listing cash offer 2) full price or over listing conventional loan with at least 20% down 3) everything else. My husband is very leery of any kind of loan with 0% down.

I got to wondering if this is just a quirk of his or if other sellers also view a no money down loan as a red flag. And really, is that fair to a buyer? How do others view this?
Interesting. My husband has a six figure a year job. Our only debt is my student loan. Which is low. We have savings and retirement accounts. Iím 31 and dh is 33. Both of us have high credit scores. We were preapproved for substantially more than the houses we were looking at.

Our mortgage would be 20% of our monthly income after taxes, and after savings and retirement. So...yeah we arenít broke lol.

We had a VA loan with zero down. Why would we not take that? Dh did 8 long years in the military. Plus the rate is crazy low and even lower when buying points. We also didnít have a home to sell since we lived in military housing, then rented while looking for a home.

Your dh is just judgmental. Sure I posted TMI, but this is an anonymous board so nbd.
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Old 06-15-2018, 05:57 PM
 
239 posts, read 72,664 times
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Quote:
Originally Posted by emm74 View Post
Yeah, I'd worry about something like that.

Or even if it's not a VA loan, the house may not appraise and possibly a 0 down buyer might not have the cash on hand to make up the difference. Sure, maybe they do and they just don't want to put it into the house, but maybe they don't.

I can say as someone who sold to a 100% cash buyer, that transaction was fast and easy, far more so than selling with financing involved. Obviously it's more luck than anything else to get a cash buyer, but I don't think it's as simple as "it doesn't matter once you get your money" because the process of getting there does vary.


I suppose with a 0 down buyer who also has the highest offer, maybe it's worth the risk? But of course if they are too high, you get into the "what if it doesn't appraise?" concern.

Plus price isn't the only variable - a fast close vs a delayed close also means money in your pocket if you manage to skip an additional month of mortgage payment, for instance.
I would think it depends on what market we are talking. I live near a buyers market. Thereís no need to pay full price for a home. If something appraised less what asking, Iíd walk away or expect them price to be reduced.
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Old 06-15-2018, 06:12 PM
 
239 posts, read 72,664 times
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Quote:
Originally Posted by emotiioo View Post
It's absolutely my business if it's my house.

If I have any offer that is more attractive than a zero money down loan I will be taking it. This is the reality for many sellers who don't relish being caught up in red tape and missed closing. If your financial situation is not real enough to get a loan with conventional financing or pay cash and I have the opportunity to select a buyer who can, you absolutely are in a poor negotiating position. If you want to get the house you want you might want to consider a different loan vehicle. Putting nothing down sends a certain message and not a positive one.

I would take a better offer I had to wait for than an immediate one with zero down. I don't believe I dealing with buyers who cannot make a decent down payment.

Do buyers really not understand that this is part of what sellers take into consideration when looking at an offer? Someone needs to be giving them better advice...
The only message it sends is that they don’t want to put money down lol. You also might not get better offers.
We not only put zero down, we asked for closing and price reduction. Got it all. I am sure you’re pearl clutching at this very moment.
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Old 06-15-2018, 07:35 PM
 
1,581 posts, read 357,280 times
Reputation: 1829
Quote:
Originally Posted by MikeJaquish View Post
Closed a VA loan purchase today.
100% funding.
Buyer had about $2500 on the table for a $180,000 buy.
Then he picked up a $536 credit from the sellers, too.
Walked away from closing with a $1200 check.

He can afford the house.
Now that's a deal that speaks to me.
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Old 06-16-2018, 07:32 AM
 
1,781 posts, read 891,771 times
Reputation: 3813
Quote:
Originally Posted by CarnivalGal View Post
It can make sense in some instances. But someone with $200K in the bank is probably not going to qualify for a USDA loan.

I know someone who just closed on their house a few weeks ago. USDA loan. 0% down. It's in suburban Austin, NOT a rural area. Although I am happy for them, I still feel that it was very, very risky. There is a reason they didn't have any money for a down payment. They are financially illiterate. They don't make much to begin with, barely make their rent payment every month, have very little to no savings, and just bought a house. Their monthly mortgage/insurance/tax payment is quite a bit more than their rent was. They have no way to pay for a major repair (roof replacements for hail damage are very common here and a real possibility), they have no medical insurance, routinely let their car insurance lapse, etc. So they are one job loss, injury, illness, storm, or accident away from homeless. I still have no idea how they got approved for a loan. Their credit is marginal as well, for good reason.
You just described the zero money down buyer to.a T. The fact that banks will lend to someone like this (in fact many people like this) keeps me up at night. It's another crash waiting to happen.

I wish people would not keep pushing buying because of the idea that renting is throwing money away. Nothing wrong with renting whatsoever if you are like the buyers described above.

Its worth quoting again from the above "there is a reason they didn't have money for a down payment." THIS is the message a zero down loan sends. Yeah yeah yeah I don't need lengthy explanations about veteran's rights and I understand that this is ONE type of zero down loan that is common. But for the love of Pete, its utterly absurd to me to even consider buying a property and not put anything down on it.

Last edited by emotiioo; 06-16-2018 at 08:46 AM..
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