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*Giggle* Off topic, but I just noticed this from the OP. Damn, Stockton is a big city! You haven't been to the boonies of CA if you think Stockton qualifies.
IMO your under water if the home drops from the value you paid for it ;no matter h0ow much you put down. Put down 10% today and it drops 11% in amonth ;your down the 10% plus 1%.YTou may have equito in teh home but it doubtful if you can borrow the 10% on its value.
I just don't get the housing industry, government officials, regulators.
I'm sure the worst of the housing collapse is behind us (although there may be some more minor price drops in the future but nothing like we've seen the past 2 years). Housing could go down 5-10% more...but nothing like 30-50% price drops in some parts of Nevada, Arizona, Florida, boonies in California like Stockton.
But why do government officials still allow FHA/VA loans with such low downpayments? Why do even private lenders still lend to people with less than 10% down? Yeah, I know there's PMI...but like AGI learned....no matter what type of insurance you offer, if you have a total collapse, the insurance companies can't cover their losses and will go down also.
My thinking is really simple.
You buy a house for "X" amount. Closing costs (in normal situations where the sellers aren't giving credit) costs 1-3% for the buyers. In order to resell the home, it will cost the sellers 5-6% real estate commission PLUS 1-2% in seller costing costs (transfer/state/stamps taxes) in most states.
So with buying/reselling real estate transactions, the homeowner is out about 10%.
What do you guys/gals think?
If the industry really wants to prevent another collapse, they need to return to the past when our parents saved enough to put down 20%. It tough to save that much and I understand that. But I feel like we live in such an entitlement world where if we want something, we find creative/risky ways to obtain it.
I am one of the people you are referring to. I don't feel particularly entitled. I just want somewhere to live where the rent doesn't get thrown out the window every month without some tax relief. I am 51 years old and I have never been in a position to buy anything before, but I'm now approved for an FHA loan.
I've been paying $2200 a month in RENT for a house so I could stay in the town where my daughter was in school. Single, divorced mom who works in Manhattan, commutes about 30 miles from NJ. It was worth it to me to not to have to abandon my kid all day in a town where she had no family or friends while I'm over a river in another state relying on public transportation.
Now that she is done with high school, my choices have opened as to where I can live, and I can move to a part of NJ still within commuting distance yet where real estate prices and taxes are significantly cheaper. To continue to pay rent somewhere at this stage in my life just to save money in a bank account seems ridiculous.
I bought my house way before the bubble, and put nothing down. As a recently divorced single parent at the time, I had good credit and a decent paying job, but no cash. I guess I never thought about it, but I was "upside down" for the first 8 or 9 years I lived here. But I didn't buy my house as an investment; I bought it as a place to live. After paying my mortgage for all of those years, real estate went through the roof and my house suddenly tripled in value, at least on paper. But it never occured to me to pull out my equity and blow it on fancy cars or vacations or other frivolous purchases. I refinanced to lower my rate and reduce the term, and kept on making payments.
Now things have settled down, and my house is worth about double what I paid back in 1993. Meanwhile, I've steadily made payments, and I now have an asset that I would not have had if I had been paying rent this last 15 or 16 years. But that wasn't why I bought in the first place. It was to provide my family with a stable, secure place to live without being at the mercy of some landlord who might decide to sell, or raise the rent, or just not renew the lease.
The problem, isn't that people can buy homes with no money down, it's that people were buying them for the wrong reason - as a quick way to make a buck instead of as a place to put down roots. Lenders just need to reduce risk by requiring documentation and only lending to responsible borrowers with decent credit and reliable incomes. And buyers need to realize that they are purchasing a house for the long term, and not as a money-making scheme.
DING DING DING, we have a winner. I can relate. I am looking for A PLACE TO LIVE, not an investment. I also don't know about the rest of the country, but in NJ, rarely will any landlord allow you to keep pets. My last one was a vet, and that rare exception. I have four cats--I'm not about to kill them so I can pay someone else's mortgage, either.
We have never, and will never put down less than 20%. We are financially responsible adults.
You also HAD 20% that you got from somewhere. "We" is a clue--you must be a 2-income household. Not everyone is. When your paycheck covers your expenses and not much else, you cannot save money, but it doesn't mean you are not financially responsible--I pay all my bills and have decent credit. I have no inheritance. I didn't get rich quick on an insurance settlement. I have yet to win the lottery.
Where is a financially responsible person who is not being handed anything and can save very little supposed to magically obtain that 20%?
I am currently looking at very small (2 BR) houses within commuting distance (up to 50 - 60 miles) of Manhattan, which can be had for around $250K if you look hard enough. 20% would be $50,000.
DING DING DING, we have a winner. I can relate. I am looking for A PLACE TO LIVE, not an investment. I also don't know about the rest of the country, but in NJ, rarely will any landlord allow you to keep pets. My last one was a vet, and that rare exception. I have four cats--I'm not about to kill them so I can pay someone else's mortgage, either.
Sounds like we are like-minded! Best of luck to you in your home search. Believe me, there is nothing like the feeling of security and peace of mind in having your own place.
Sounds like we are like-minded! Best of luck to you in your home search. Believe me, there is nothing like the feeling of security and peace of mind in having your own place.
Thanks! I am looking forward to it. New stage of life and all that. Best of luck to you as well.
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