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Look I won't debate the what's what with you. I know you're the expert in all things. You opened your mouth and stuck foot in before the OP responded. He clearly stated he was in the industry and writes mortgages with down payments much less than what he/she is putting down. Also I would assume the OP is pretty knowledgeable being in the industry. Secondly the OP clearly stated they did not mind paying PMI and keeping the money he/she has. So before you tell someone something please wait for all your information.
Also I work for a BANK and they don't have issues lending to someone with less than 20% down they are being more stringent on (income verification, appraisal value) so please know what you're talking about before you Open mouth and Insert foot.
You seem to have reading comprehension issues. The OP stated the the homeowner/listing agent had problems with his low down payment (not the bank). I don't know exactly what you do for your bank, but why do you think that they are stricter with someone who puts down less than 20%? Do you really think that someone who puts down >20% is just as likely to default as someone who puts down 4% (everything else being equal)?
As I mentioned before, where else are you going to draw the line (if not 20%)? Do you really think that it's a good idea for someone who can barely afford to put down 3.5% (and have little to no money left over) to go out and buy a house? How did this strategy work out for all of these people who purchased half a dozen years ago?
If you had enough cash put away to take care of all of these other things, then it seems like you probably could have afforded to put down more than 3.5%. The key word here is "AFFORD." Why do you think that FHA loans have a higher interest rate? And why are people who put down <20% on conventional loans required to pay PMI? Of course nothing short of 100% down is foolproof, but where are you going to draw the line?
My FHA loan has a lower interest rate than any of the conventional mortgages my friends or my wife's friends have obtained.
You seem to have reading comprehension issues. The OP stated the the homeowner/listing agent had problems with his low down payment (not the bank). I don't know exactly what you do for your bank, but why do you think that they are stricter with someone who puts down less than 20%? Do you really think that someone who puts down >20% is just as likely to default as someone who puts down 4% (everything else being equal)?
As I mentioned before, where else are you going to draw the line (if not 20%)? Do you really think that it's a good idea for someone who can barely afford to put down 3.5% (and have little to no money left over) to go out and buy a house? How did this strategy work out for all of these people who purchased half a dozen years ago?
That old red herring?! Giving out bad loans cost a few million. Wall St repackaging the loans and selling them as A+ rated trading instruments cost billions. Let's stay in reality.
I STILL don't get why a down payment has the SLIGHTEST bearing on the seller. It is purely between the buyer and his lender. WTF?!
My FHA loan has a lower interest rate than any of the conventional mortgages my friends or my wife's friends have obtained.
They are pretty close, but in our experience the private PMI was significantly less than FHA MIP. However, you do need at least 5% down for a conventional loan with PMI, as opposed to 3.5% with FHA.
How does it all stack up when you add on the mandatory PMI? (Just sincerely curious; not jumping in to "argue!")
Not sure. I don't plan on having PMI on the loan for more than 2 years. With the low interest rate and extra principal payments, I plan on achieving 22% equity way before the scheduled PMI expiration.
That old red herring?! Giving out bad loans cost a few million. Wall St repackaging the loans and selling them as A+ rated trading instruments cost billions. Let's stay in reality.
I STILL don't get why a down payment has the SLIGHTEST bearing on the seller. It is purely between the buyer and his lender. WTF?!
The point I was making was the effect on the individuals who are now underwater, and not who bears responsibility for the situation to begin with. Anyway, the reason that a seller would be concerned about a low down payment is the possibility that the property would not appraise for the loan amount, e.g. a 3.5% down payment would mean that the house would have to appraise for at least 96.5% of the selling price. This problem is more acute with FSBOs, because they tend to be overpriced to begin with.
Addressing the question of why a homeowner would balk at a lower % down. I will be closing next month and as a seller I can say that a buyer with less down would make me nervous. Why? Because let's say you come in and have $$ in the bank but want the balance to stay there. You offer to put 3.5% down, but as a seller I have no way of knowing if that is all you can afford or all you want to put down. You may tell me that is the case but I simply have no way of verifying that fact. Now, I accept the offer and go to contract and the mortgage is turned down. Now let's say that you are not an emotional buyer and decide that there will be another house that will come up because you are sticking to the plan of only 3.5% down and the rest stays in the bank. That plan is certainly your prerogative and makes much more sense than buying more house than you can afford and becoming house poor. That said, as a seller that time frame could have cost me a month on the market when I am trying to sell my home in a buyers market.
I am not accusing anyone of not being able to afford to buy my house, it is simply the reality that as a seller, I want to protect my back so I can move on as effortlessly as possible. The indisputable fact regarding mortgage money now compared to years ago is that it has tightened up for any number of reasons, not the lest of which is the foreclosure rate. Despite the slight uptick in the economy, th mortgage rates and interest rates will begin to climb only when the economy becomes strong enough to support it.
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