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Old 12-13-2008, 04:07 PM
 
Location: Murphy, TX
650 posts, read 2,734,806 times
Reputation: 445

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I think it is absolutely bad idea loosening mortgage restriction. In fact, I think we highly tighten up with income rations, higher down payments, type of loans, etc. The result of this would force homes price to become more affordable. Here my idea about mortgages:

Require 33% debt to income Ratio

Down payment in CASH (no piggyback loans). Here what I think down payment should be depending on price of the house:

Less than 100K - 10% down payment (include FHA/VA)
100k+ to 200k - 20 % down payment
200k+ - 300k - 30 % down payment
300k+ - 400k - 40 % down payment
500k+ - 50 % down payment

FHA and VA (HUD) - Should be capped at 200k loan for ALL across the US. Furthermore, the down payment should be raised to 10%.

Next requirement, is borrower MUST have 3 months of emergency cash (liquid) reverse after down payment and closing cost are down. This will ensure if they lose job they can keep on paying for awhile at least.

ARMs should be eliminated and Fixed loans should be allowed.


What these policies should do is guarantee people can actually afford the house they buying. Especially on the higher priced housing. People won't go around defaulting on their houses like they are doing now.

It will drive down all the overpriced housing. I believe this should lower median house price to under 200K all across the USA; Since it will be harder to buy house over 200k due higher down payment. This exactly what need to happen, houses need to affordable and people who actually pay the mortgage should be able to buy the houses!
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Old 12-25-2008, 03:43 PM
 
328 posts, read 809,248 times
Reputation: 200
I completely disagree. We need to change our perception of what a need and want is. Why does each homeowner need to have 5 cars per house hold and every electronic device known to man? We spend our money on a lot of unnecessary items.

It was a huge adjustment when I bought my home. I stopped eating out and I really had to watch my pennies. I got rid of a lot of unnessary items. Homeownership taught me about responsibilty and I put down less than 20%. Based on you rules, I would not have my home today.

People who have high credit debt should not be allowed to purchase homes regardless of income. It is a bad risk. I think credit cards should be abolished. That will force folks to become more responsible with their money. Having a high income does not mean much if you are wasteful with money.

Why should homes be capped at 200,000? Let the market decide. There is a home for most price ranges. People want homes that are out of their price range. It is not the new mortgages that got us into this mess. It is the people who had equity in their homes that refinanced their mortgages with subprime lenders.

Interest only loans should be eliminated. It just does not make sense. ARM loans could be a good idea if the loan adjusts to a fixed rate. Do not do it if it does not adjust to a fixed rate! Strangely enough, these loans are still around. Why is that? The credit card new rules will not go into effect until 2010. How can these bastards get away with this? We should all pay off our credit cards and cut them up. If I can not make a purchase with my debit card, I do not make a purchase.
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Old 12-25-2008, 04:50 PM
 
Location: Marietta, GA
7,862 posts, read 15,218,406 times
Reputation: 3576
The LAST thing we need is to "drive home prices down."
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Old 12-25-2008, 05:01 PM
 
298 posts, read 650,421 times
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Quote:
Originally Posted by neil0311 View Post
The LAST thing we need is to "drive home prices down."
Actually, this is exactly what we need.
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Old 12-25-2008, 05:12 PM
 
48,509 posts, read 86,254,134 times
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I certainly don't see having down payments increase with the house. As long as the documentation is done right ;the loans can be as safe as they were years ago. i also think that people are looking for too much of a lowering when the cost of land and the materials will not go down really.Just as Arm's make sense if done right by the right buyer.Your plan would lead to very high property taxes also as the cost needs to be distributed across a large number of homes to pay for services that a city gives homeowners. That is what may drive up property taxes or lower services is the number of vacant homes in the near future and that includes homeowners insurance.
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Old 12-25-2008, 05:24 PM
 
298 posts, read 650,421 times
Reputation: 176
Current housing / mortgage problem as best I can tell:

Home prices are inflated because of lax lending standards. The easier it is to get money, the more people will get. As people are able to get more money, the will pay more for the houses. This cycle just fed upon itself until all of the lenders (or the investors they sold the loans to) started experiencing essentially collection problems and the fun times ended. Lenders were willing to loan to such high risk groups because they were bundling the loans and selling them to other investors (mainly institutional investors). The investors either were misinformed about the investments or they did not check the investments (and accompanying warning flags) thoroughly enough.

The real solution (besides letting housing prices return to normal, appropriate levels, which is something we need to let happen) is for everyone in this country to take out loans for only amounts they can afford to pay back, for lenders to set lending standards that they think will enable them to get their money back plus interest, and for all investors (institutional or otherwise) to understand what they invest in before investing.

Of course, if everyone had just done this in the first place (instead of acting on greed or ignorance) then we wouldn't have such a big problem.

I don't think babysitting by the government will help though. When people get bailouts and rules to follow instead of experiencing the consequences of bad actions, the root problem doesn't go away. We can make rules in one area, and greedy people will just find a different way to feed their greed. What we need more than anything is a nation of people (in the private sector, in business, and in government) who are willing to educate themselves about investments & major purchases and who intend to make responsible decisions. If we don't have that, then we are in trouble no matter what happens.
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Old 12-25-2008, 05:29 PM
f_m
 
2,289 posts, read 7,655,766 times
Reputation: 874
What would likely happen in higher priced areas is that the inventory would go down (which is what is happening), since people would likely sit tight or rent out than sell at a loss.
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Old 12-25-2008, 05:39 PM
 
298 posts, read 650,421 times
Reputation: 176
Quote:
Originally Posted by f_m View Post
What would likely happen in higher priced areas is that the inventory would go down (which is what is happening), since people would likely sit tight or rent out than sell at a loss.
In the short term that's probably what would happen, but if the money is gone in the long term (by gone I mean no one is willing to lend as much to people at the same income levels anymore - so basically the money to purchase houses decreases), then home prices will drop in the long term.
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Old 12-25-2008, 06:00 PM
 
Location: Marietta, GA
7,862 posts, read 15,218,406 times
Reputation: 3576
Quote:
Originally Posted by HSVbulldawg View Post
Actually, this is exactly what we need.
Maybe in places like California or NY where home prices were completely divorced from any reality. A broken down shack on a postage stamp in parts of CA were going for close to a million in 2005.

However, in places where there was a limited or no bubble, home owners are losing real equity and wealth, and some homes are undervalued due to foreclosures and the downward pressure on prices. While I understand the forces creating this fact, we should not be devising ways of hastening or increasing that decline. That doesn't solve our problem and only increases deflationary pressures as people hold off buying, expecting a lower price if they wait. We need a floor under prices.
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Old 12-25-2008, 07:00 PM
f_m
 
2,289 posts, read 7,655,766 times
Reputation: 874
Quote:
Originally Posted by HSVbulldawg View Post
In the short term that's probably what would happen, but if the money is gone in the long term (by gone I mean no one is willing to lend as much to people at the same income levels anymore - so basically the money to purchase houses decreases), then home prices will drop in the long term.
This would also drive down property taxes, which is what the government wouldn't want to see.
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