Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Nicole, you need to do some reading on biology. You have seven years before you really need to be getting pregnant. And you haven't even graduated yet. Are you going to be saving $1000 a month straight out of college? Because the target amount is increasing even as you move towards it, and the size of the house you'll need is also increasing. There's a 50% chance your second kid will be a different sex than the first. And once you have that first baby you can kiss a couple of thousand a month goodbye on childcare. Will you still be saving that $1000 a month then?
Nicole, you need to do some reading on biology. You have seven years before you really need to be getting pregnant.
I am not "Nicole" - my first initial is "n" and my last name is "cole", and I am male and will never be pregnant.
Quote:
Originally Posted by WildColonialGirl
And you haven't even graduated yet. Are you going to be saving $1000 a month straight out of college?
I am in grad school, with a total of about $30k in savings that could, hypothetically, be used as a down payment on a future house without touching retirement or emergency funds, though this is not my intent with it. The tax basis is not that far below the current value so a liquidation would not produce a significant tax bill.
If I were to marry someone in a financial situation identical to myself, this would be $60k off the bat, not counting the fact that my income should increase drastically once I graduate. So this is $50k for 20% down on a $250k house, plus $10k for closing costs and other things like moving and furniture.
Of course this is all a silly hypothetical because I don't intend to buy a house that soon and the money is partially intended for other goals.
Quote:
Originally Posted by WildColonialGirl
Because the target amount is increasing even as you move towards it, and the size of the house you'll need is also increasing. There's a 50% chance your second kid will be a different sex than the first. And once you have that first baby you can kiss a couple of thousand a month goodbye on childcare. Will you still be saving that $1000 a month then?
More than that, unless my career really turns south, which I suppose it could if the economy tanks. But that is precisely the type of situation I am trying to prepare for by having a cushion in the first place.
I have read all but the last few pages of this thread.
I sat thru and watched the whole gory collapse of the housing market and with it our financial, economic, and social systems.
In summation I believe that higher down payments transfer more financial risk to borrowers as the less skin they have in the game, the less they have to lose. To follow a policy of risk avoidance however, would lead one to prefer interest only loans, but I don't see anyone favoring that!
At the beginning of the housing bubble - and I think we all agree there WAS a bubble - interest rates were relatively high so investors, hungry for yield, saturated the lending pool with ever more liquidity, causing RE to rise dramatically. This in turn attracted more sub-prime borrowers and 'flipper/investors' into the market to cash in on the capital appreciation that seemed endless. Banks, by bundling and selling these loans to a variety of investors did precisely what no-down payment homebuyers did, i.e. simply transferred the risk to someone else!
When the market became saturated, as it inevitably does in such mad-crowd manias, price rises level off as the few 'natural' foreclosures reverse the trend. Once prices start downward, speculators go belly up, adding fuel to the fire and the downward trend sped up; buying comes to a screeching halt as we entered a terrible negative feedback loop.
In retrospect, the no-money-down aspect, once a stimulator of demand, became a critical agent of this loop as negative equity destroyed much wealth and fed the cycle of fear that plunging home prices create.
So one can say that little or no money down for such a LARGE ILLIQUID ASSET is good for borrowers, but very bad for THE FINANCIAL SYSTEM. This, by extension, puts the housing market at risk.
I am not "Nicole" - my first initial is "n" and my last name is "cole", and I am male and will never be pregnant.
WCG's mistake is understandable as several times in this and other threads, posters have referred to you as "she" or otherwise indicated that you were female, and you never corrected them, so many posters have come to assume that you were female.
More to the point, unless you are practicing celibacy, don't say you "will never be pregnant". If your lady conceives, you are "pregnant", and even if you don't marry, you'll be forking over 17% of your income to provide for your child until he/she is at least 18.
Quote:
Originally Posted by ncole1
I am in grad school, with a total of about $30k in savings that could, hypothetically, be used as a down payment on a future house without touching retirement or emergency funds, though this is not my intent with it. The tax basis is not that far below the current value so a liquidation would not produce a significant tax bill.
If I were to marry someone in a financial situation identical to myself, this would be $60k off the bat, not counting the fact that my income should increase drastically once I graduate. So this is $50k for 20% down on a $250k house, plus $10k for closing costs and other things like moving and furniture.
Of course this is all a silly hypothetical because I don't intend to buy a house that soon and the money is partially intended for other goals.
Do you actually have a social life or do you spend your life in classes, libraries, and on the internet??? Most people don't pick their spouses like they would a mutual fund, but even if they did, there's no guarantee that their financial future would go as planned. Life happens.
WCG's mistake is understandable as several times in this and other threads, posters have referred to you as "she" or otherwise indicated that you were female, and you never corrected them, so many posters have come to assume that you were female.
More to the point, unless you are practicing celibacy, don't say you "will never be pregnant". If your lady conceives, you are "pregnant", and even if you don't marry, you'll be forking over 17% of your income to provide for your child until he/she is at least 18.
Although this is in part a semantic quibble over "pregnant", yes. The thing is that the assumption that poster made was that my age meant I have 7 years to go, which a case could be made for if I were female, this is why it matters. Of course you could make the argument that most people marry near their own age, in which case, point taken.
Quote:
Originally Posted by Linda_d
Do you actually have a social life or do you spend your life in classes, libraries, and on the internet??? Most people don't pick their spouses like they would a mutual fund, but even if they did, there's no guarantee that their financial future would go as planned. Life happens.
As I said, it was just a hypothetical example of how it could be done.
Plan B is to rent a little longer before buying, Plan C is to move to a LCOL area, should I get married to someone without the savings, Plan D is to buy a 2-bed condo which can be had in my area for about $150k, Plan E is to be a one-car household to save more money, Plan F is to use a small amount of unsecured debt to cover the gap ("small" means that the interest is less than a typical PMI payment and the monthly obligation is small enough to not cause DTI problems), Plan G is to take money intended for buying a car and put it towards the house, financing the car instead.
It is, of course, possible that every single one of these options will turn out impractical for some reason or another, though I doubt it is more likely than the things that you don't seem to worry about (a few percent fall in home value plus needing to sell at that time).
Also consider that I would need 2 years of employment at much above my current income to even qualify for a mortgage in the first place, which can also be partially saved and used to cover a shortfall.
At the beginning of the housing bubble - and I think we all agree there WAS a bubble - ...
No, we most definitely do not all agree that there was a housing bubble. In fact, housing markets behaved exactly as they should have the entire time. It was FINANCIAL actors -- meaning lenders, not borrowers -- who misbehaved and FINANCIAL markets that were ultimately poisoned and collapsed by that misbehavior. If it matters at all, I can say that I would disagree with just about everything else suggested in your post as well. Here are a few highlights...
-- High liquidity existed in the system in the aftermath of the Russian and Asian financial crises, and as the result of tax cuts for the rich and the Fed's decision to shore up investor confidence after 9/11 by slashing the federal funds rate to 1% and then keeping it there until economic activity picked up. You mentioned none of those things.
-- A bright light had been shown on the better than average profitability of lending into traditionally underserved markets by the success of CRA loan portfolios in the mid-1990's. It was new LENDERS not new borrowers who were then drawn like moths to that flame. The borrowers and their credit needs had always been there. Sadly, they and others were about to be exploited by an abusive cabal of unrestrained cowboy capitalists.
-- Securitization is garden-variety finance. There is nothing nefarious going on here, and it has been going on for decades. It is the sell side of what is inherently a buy-sell situation. It is the means by which primary lenders rebuild their cash stocks so as to be able to lend again. The transfer of any asset at all meanwhile reassigns risk.
-- The notes that failed were deliberately written to fail by greedy brokers who were sure and assured that they could put lipstick on a pig and sell almost anything at all into secondary markets through the private-label securiting shops that Wall Street had built out as a bypass around the various standards imposed by the GSE's.
-- Your "natural foreclosures" were never a problem. The system has always contained tolerances and allowances for those. What did the damage was the boatloads of tricked-out high-cost notes that the Wall Street cabal wrote AFTER the supply of actually qualified borrowers had been exhausted in an effort to keep their large profits and bonuses flowing. These lenders knew full well when they wrote them that these notes would fail once interest rates rose, but they didn't care. It was all a case of I got mine, the rest of you are on your own.
-- The eventual self-reinforcing downward spiral arose because damage from the initial wave of tainted product defaults could not be contained within financial markets. Like some aggressively invasive plant species, the hidden tentacles of systemic risk that first paralyzed major banks could not be uprooted, and credit and resulting employment issues leaked out into the Main Street economy where they eventually led to asset market collapses. Huge waves of closures and layoffs suddenly put ordinary people in no position to be able to make their mortgage payments, no matter what their down-payment had been.
No, we most definitely do not all agree that there was a housing bubble. In fact, housing markets behaved exactly as they should have the entire time. It was FINANCIAL actors -- meaning lenders, not borrowers -- who misbehaved and FINANCIAL markets that were ultimately poisoned and collapsed by that misbehavior. If it matters at all, I can say that I would disagree with just about everything else suggested in your post as well. Here are a few highlights...
-- High liquidity existed in the system in the aftermath of the Russian and Asian financial crises, and as the result of tax cuts for the rich and the Fed's decision to shore up investor confidence after 9/11 by slashing the federal funds rate to 1% and then keeping it there until economic activity picked up. You mentioned none of those things.
-- A bright light had been shown on the better than average profitability of lending into traditionally underserved markets by the success of CRA loan portfolios in the mid-1990's. It was new LENDERS not new borrowers who were then drawn like moths to that flame. The borrowers and their credit needs had always been there. Sadly, they and others were about to be exploited by an abusive cabal of unrestrained cowboy capitalists.
-- Securitization is garden-variety finance. There is nothing nefarious going on here, and it has been going on for decades. It is the sell side of what is inherently a buy-sell situation. It is the means by which primary lenders rebuild their cash stocks so as to be able to lend again. The transfer of any asset at all meanwhile reassigns risk.
-- The notes that failed were deliberately written to fail by greedy brokers who were sure and assured that they could put lipstick on a pig and sell almost anything at all into secondary markets through the private-label securiting shops that Wall Street had built out as a bypass around the various standards imposed by the GSE's.
-- Your "natural foreclosures" were never a problem. The system has always contained tolerances and allowances for those. What did the damage was the boatloads of tricked-out high-cost notes that the Wall Street cabal wrote AFTER the supply of actually qualified borrowers had been exhausted in an effort to keep their large profits and bonuses flowing. These lenders knew full well when they wrote them that these notes would fail once interest rates rose, but they didn't care. It was all a case of I got mine, the rest of you are on your own.
-- The eventual self-reinforcing downward spiral arose because damage from the initial wave of tainted product defaults could not be contained within financial markets. Like some aggressively invasive plant species, the hidden tentacles of systemic risk that first paralyzed major banks could not be uprooted, and credit and resulting employment issues leaked out into the Main Street economy where they eventually led to asset market collapses. Huge waves of closures and layoffs suddenly put ordinary people in no position to be able to make their mortgage payments, no matter what their down-payment had been.
I'm sorry, but as someone who saw their home's value drop because borrowers walked away, that is a crock. There is plenty of greed and blame to go around, but don't borrow money you know you cannot pay back. We had to save and write a check to close our home which was nauseating- we honored our obligation while others got paid to walk. Sickening.
A few thoughts on whether you need 20% down... Your mileage may vary but the answer depends. Consider my personal situation:
1) I live in a low COL area... a decent house in a nice part of town can be had for $100,000. The monthly payment on that is going to be in the $600 range, and that's including your escrow account for property tax.
2) Rent is higher than that. Unless you live in a junky part of town and your car's constantly getting broken into.
3) I have no balance on my credit card, no student loan, and three cars, all of which I paid cash for. Car payments suck.
4) My credit score is 770+ last time I checked.
5) I've recently accepted a professional position that's going to be about as permanent as it possibly gets. So I'll be able to save a minimum of $1,000 per month in addition to the rent/house payment.
***
And I need 20% down? It would take two years to save that money... two more years that I'd be stuck in the city, paying city taxes. It would actually lengthen the amount of time needed to save money by several months. No, thanks.
Hmmm. You've been soundly snookered by those who were paid well to snooker folks like you. Interest rates and asset prices are inversely related. Mortgage interest rates fell by 335 basis points between mid-2000 and mid-2003. What would you have expected home prices to do in response?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
