25% down pay, for real? (Austin, China: foreclosed, refinance, lenders)

[hilsmom]

Originally Posted by sinking

Yes!

what do you folks consider "financially ready" though? Because in my area, a tiny TH costs more than $300K. Unless you are bringing in more than $200K combined there is no way you can afford to buy a single family home in a close-in or downtown neighborhood.

So people who live in high cost areas that DON'T make the big bucks shouldn't ever have kids because they could never afford to buy a $600K house outright?

I wish anything bigger than a studio apartment was available for $150K here.

[curious1111]

Originally Posted by sliverbox

25-30% used to be what you had to put down on a house anyway. In my opinion this is the way it aught to be and if I had my way, that rate would be closer to 30%. One of the main reasons the housing market went through such a huge bubble over the last few years was because people were not putting any skin into the game: There were no down payments. All that did was cause prices to inflate out of control. With a significant down payment requirement up front this will help keep the lid on prices a bit more.

Personally we're probably going to buy our first house for cash. I see little benefit to paying years and years of interest payments.

Respectable if it works for you. For others, when you look at what their money can do/perform elsewhere and the interest expense deduction, vs. just paying cash... it doesnt make a lot of sense to do so, especially at such low interest rates on home loans...

[jobert]

Originally Posted by hilsmom

So people who live in high cost areas that DON'T make the big bucks shouldn't ever have kids because they could never afford to buy a $600K house outright?

Perhaps if people were required to bring 30% to the table, then we wouldn't have these $600K houses in the first place. It's easy to bring 5% of 600K to the table. If people are required to pay more, then the house sits longer, and the price corrects itself.

The other "elephant in the room" is that high property prices are a direct result of areas becoming overpopulated, with these prices being a not-so-subtle hint about it. When the consumer says "the price is too high" the market is saying "there are too many consumers, and there is not enough of a finite resource to go around, so adjust your consumption behavior accordingly" It applies to everything from generic brand cereal to oil to the cost of housing.

[JayBrown80]

Originally Posted by sinking

I think the word you are looking for is "sell".

You bring up some good points but when it comes down to it you have to live somewhere and most people have to pay to live there whether it is in rent or a mortgage payment. For me, I have a mortgage payment cheaper than it would be to rent most houses and I am gaining some equity at least.

Thanks for the spellcheck.


You are right, you have to live somewhere. The point I am trying to make, is that most people will always be paying to live somewhere. Whether they are paying rent, or mortgage, or just property taxes. There is never a point in your life where you will be free and clear and never have to make payements. My Grandmother lives on the same farm she was born on, and her house has been paid off since 1993. She still pays property taxes.

Most people think that buying a home is a good idea, b/c that is what realtors and society tells them. But it is often not the case. No couple in their 20's can say with absoulte certainty that they are going to live in their new house for the next 40 years. 99.9% of the time, they will move.

And they always buy houses based on how much they can get a loan for, not how much they can afford. And they buy bigger and bigger and bigger. As big as their salaries will allow. That is not the path to wealth. Just like buying a brand new and more luxurious car every 2 years is not the path to wealth.

I don't care if people buy a new house every year. More power to them. I just don't like it when people keep on passing along the misinformation of "Buying a home is the path to financial freedom." It's not. It MAY be, for some people. But usually it's not.

I am just answering the OP's question of "25% down pay, for real?". My answer is yes! For real. There has to be a barrier of entry to protect society from the stupids.

It may seem harsh, but some people should NOT be homeowners. And as long as our tax dollars go to bail out banks that cater to "the stupids" then I think the government has a responsibilty to say "okay, no more. You have to bring this much to the table" before you can get a loan.

To everyone that bought their homes for no money down and were responsible home owners, good for you! You did the right thing, and took advantage of a really sweet situation. I don't fault you. I fault the neighbor on either side of you that has absolutely no common sense and managed to crash the economy thru the sheer force of their collective stupidity.

[garetcurry]

There's a bottom line to any financial decision you make. It can be as simple as finding the cheapest rate on petrol (normally at HEB around here) or as complicated as buying a home.

An informed buyer is always best.

[sinking]

Originally Posted by hilsmom

what do you folks consider "financially ready" though?

I have never done the math because I never want kids but I would say before having kids if you want to buy a house you should be able to put at least 20% down, be debt free (not counting a house), 12 months of expenses in the bank, have a start on your retirement funds, be able to pay for any child related expenses you can predict, and still put at least 25% of your income away for savings.

[JayBrown80]

Originally Posted by hilsmom

what do you folks consider "financially ready" though? Because in my area, a tiny TH costs more than $300K. Unless you are bringing in more than $200K combined there is no way you can afford to buy a single family home in a close-in or downtown neighborhood.

So people who live in high cost areas that DON'T make the big bucks shouldn't ever have kids because they could never afford to buy a $600K house outright?

I wish anything bigger than a studio apartment was available for $150K here.

I sympathize with your situation. But to be frank, the reason home prices are so exxagerated in your area is because such low down payments allowed so many buyers into the market, it drove the prices up.

If there are more consumers than their are products, then it drives the price up. Your market would self adjust if less people were able to buy homes.

That probably doesn't help you in your situation. And it will absolutely screw over home owners when the value of their homes is cut in half. But to be frank, most of those people didn't own their homes outright to begin with.

It is ridiculous that a home, that is made of bricks and boards and shingles, can be marked up 6 times what the materials cost to make it. It wasn't a self fufilling market, there was no way that it could keep on going the way it did. If a house costs $100K to build, counting supplies and labor, why should it sale for $600K? It's because the market was so easy to enter, that it drove up the prices on the limited stock that existed.

To answer your question, a family is financially ready when they can put 25% down. At least that is what Fannie Mae is saying. If houses are so over priced where you live, you have to either 1) continue renting or 2) make the financial sacrifices necessary to buy into your over priced housing market.

What I hear most people saying is "But 25% makes it REALLY HARD to buy a house". To which I say, "well yeah, that's sort of the point".

There is no doubt that you are getting the short end of the stick Hillsmom. And a lot of people are going to get screwed in this situation. But it's the only way to correct the housing market. Everything has balance. For 15 years it was super easy to buy a house, now comes the balance. The climate for home buying was SO easy and SO simple, that the pendulum swing in the other direction is going to be very very harsh. That's life.

[hilsmom]

Originally Posted by sinking

I have never done the math because I never want kids but I would say before having kids if you want to buy a house you should be able to put at least 20% down, be debt free (not counting a house), 12 months of expenses in the bank, have a start on your retirement funds, be able to pay for any child related expenses you can predict, and still put at least 25% of your income away for savings.

hahahahahahaha

REALLY? That would disqualify almost every person I know with children. Unless they are having kids into their 40s, which isn't really optimal either.

[sinking]

Originally Posted by hilsmom

hahahahahahaha

REALLY? That would disqualify almost every person I know with children. Unless they are having kids into their 40s, which isn't really optimal either.

Good.

[sliverbox]

Perhaps if people were required to bring 30% to the table, then we wouldn't have these $600K houses in the first place. It's easy to bring 5% of 600K to the table. If people are required to pay more, then the house sits longer, and the price corrects itself.

Exactly. All one has to do is look at any chart showing home price changes over the past 100 years. From the 1890's- the late 1990's, early 2000's that price curve was fairly consistent: A slow 1%-3% annual change. Look at it from around 2002-2006 and that curve suddenly spikes upward dramatically with anywhere from 10-20% in most major metro markets. This of course happened once the practice of low down payments and "creative" loan products became prevalent.

By making everyone have to work harder and longer for a down payment ultimately means the less we would all have to pay for a house simply because people would be less eager to pay more for houses if they actually had to save up a significant sum to do so.