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No, I couldn't just tell the landlord goodbye and find another place to rent. There wasn't a single place for me to rent in the first place. I have no family here to move in with.
Regardless, back when I did rent, not once could I not afford the rent. And now that I'm paying a mortgage (obtained with 3% down) I have never been unable to afford it. Household repairs aren't killing me either. Never in my life have I paid a bill late. I am doing better than ever, financially speaking. There is nothing about paying less than 10% down that has jeopardized my ability to meet my obligations.
Ok, let me ask you. Did you buy your place in 2005- early parts of 2007? If you happened to buy your place during that time with very little downpayment, most likely you would be upside down on your mortgage. Whether you plan on staying in your place for a long time is for another discussion. But what if you purchased during those peak years and put very little down, you would be pretty much screwed unless you have significant savings.
But if you purchased your home after the housing bust, you would be sitting pretty now. Good for you.
But getting back to my main point. The reason I put the number 10% down, is because I am factoring in the front end and back end real estate transaction costs. That's where 10% comes in. Roughly 3% to acquire a property. Roughly 7% unload a property. I am including escrow, state stamps/transfers, and real estate commissions.
And the problem was the lending standards during the peak years. I read 1/3 of homeowners who were approved for mortgages in 2005-2006 would not have been approved for mortgages in 2009. Um, I wonder how many homeowners are in trouble who purchased in 2005-2006? It's a pretty high amount.
But the point is that so many people are under water because of low downpayments. People wouldn't be begging for short sells or just walking away if they put significant money down and paid into the principal.
aneftp, that completely makes sense for the 2005/7 years. I thought the thread title was meant for 2009 (due to 'putting') and the near future. As mentioned previously, buying this year seems to be a different ball game compared to other years. We didn't have to worry about closing costs and when I calculated the cost of the house compared to the last sales price in 1997, my numbers show an increase of about 3%/yr, which I think is fair. Our lender was less worried about the down payment, but very concerned about our income and savings. In my mind, there is little difference between a affording a $1,500/mo mortage or a $1,700/mo mortage so the bigger down payment didn't really play a role in affordability.
I think that houses are Soo expensive, that most people cannot save twenty percent in a reasonable amount of time. The price of housing has been inflated to an incredibly high level, and wages have not kept up with the price increases. The property taxes in my area have also gone up a LOT and that makes having a mortgaged property even MORE expensive. If you can pay 3-10% instead of 20% then I would do that. Or maybe pay 15% even if you have saved 20% because you will need that money for emergencies.
At any rate, I think the cash-strapped buyer's best bet is to get the best deal on the house and make sure that the value of the house increases over time.
I have complained a lot about housing prices, but I recently bought a house! It's at the top of my affordability range, but so are almost all of the houses on the market...STILL. Sadly, I was tired of living in a suburban apartment because the security is non-existent and the whole white-box/taupe carpet/lack of decor was driving me insane. Anyway, if you can't pay 20% or more down, try to pay as little as you can for the house and then work hard to make extra payments to pay down the loan. I agree that borrowing money is awful, but that's what most of us have to do if we want to "own" a house in our lifetimes.
Why do so many people say this.. that "No one is innocent" or, "We are all part of the problem", etc.?
Seems blatantly false to me. Is it some sort of moral justification for throwing all these financial obligations onto the taxpayer?
I'm not sure what you mean by your statement. Welfare recipients did not purchase homes they could not afford; Tax payers did. We live in a consumer driven society. Why do you think unemployment is nearly 10%?
I'm not sure what you mean by your statement. Welfare recipients did not purchase homes they could not afford; Tax payers did. We live in a consumer driven society.
I'm a taxpayer. I've never bought or owned a house, and I've never taken on a mortgage. There are millions of people like me. Yet, you claim that we are guilty of causing the debt crisis. What are we guilty of? Please explain.
Quote:
Why do you think unemployment is nearly 10%?
supply exceeds demand in most industries across the globe.
I'm not sure what you mean by your statement. Welfare recipients did not purchase homes they could not afford; Tax payers did. We live in a consumer driven society. Why do you think unemployment is nearly 10%?
I was not on welfare, paid my taxes every year I have worked, and just bought a house May of this year. I don't think I was part of the problem, but by your definition I am!
I suspect there were at least a few people to blame for the "crisis."
For one short sale, I did a background check on the borrower. Not only was he a drunk (arrested for DUI and domestic abuse on multiple occasions), but he also had SEASONAL construction job. The battered wife worked as a waitress and they had three kids! Somehow the bank loaned them upwards of $350,000 for a house in need of repair + a home equity loan.
I have more stories. I know of investors who paid 5-10 times the value of "investment" properties in our city. One couple bought the property sight-unseen. The area was great, but the place was unlivable without a COSTLY renovation. Mind you, the maximum income from this place would have been $1500 per month—and that’s a stretch. They were foreclosed upon last year.
One guy paid 450K for a fixer-upper in a “transitional” area. The renovation he partially finished would have cost upwards of 300K. Monthly costs would have been about $6000. The maximum monthly income upon completion would have been under $5000. WIT (what in tarnation) I also met a woman who bought a building in a scary, crime-riddled ghetto. She was nice, but from out of town, so I guess she didn’t know. Most likely, she though she was getting in on the “ground floor” of the next hot area. She didn’t tell me how much she paid, but she was in the midst of a foreclosure at the time that we spoke.
In another case an out-of-state bank lent more than 500K to a self-employed woman with little income for her large, but dilapidated house. The house did have a lot of land, but most of it was unable to be developed because of trees, hills and utility right of way that cut diagonally across the property. This lady actually defaulted JUST a month or two after she got the loan. According to the property record (these and court records are public in my state, which is how I know about the drunk guy), it looks like she may have done a title transfer and refinance. I wonder what she did with all the lovely money.
I think banks should do credit checks and background checks when they give loans. They should also do math. But I guess they don’t have to. Because of the “magic” of “currency”, a lot of people got PAID via commissions and such and the taxpayers are left holding the bag.
Look, I'm back on topic: I think even if those guys had paid 20% down, they overborrowed so much it may not have made much difference.
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