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I provide capital and liquidity to my landlord but I don't get a lump sum windfall or capital gain in the deal.
nonsense . you have zero money invested or at risk . you simply are paying for the use of something someone else owns . like renting a Halloween costume .
Wrong. Remember, you and I have almost the same history. Except for the part where I worked my way up in a job instead of quitting when the first job out of college I really wanted didn't happen. Except for the part where I made owning a home a priority and made it happen. Except for the part where I refused to make excuses, and instead made a living. Which included moving to another state for a better economic environment.
We both grew up poor and working class. We both went to college. The difference is that you actually graduated from college, and are a man - 2 points towards you and against me.
Nothing "excludes" people like you from buying property. NOTHING. It's just a choice you've made.
You have a choice, don't pay rent. Get a yurt and leave out in open air. Dirt cheap!
Not much choice in this country; people who live in open air without paying rent cannot secure their possessions and often lose them to theft, exposure, and/or police action, without recourse.
Everywhere I turn it seems that low down (<20%) and no-down mortgages are being passed off as if they are a good thing, in the name of "allowing first time buyers to enter the housing market". I'm not so sure about this.
1. House prices always fluctuate a little bit. Without a decent equity cushion, you are at high risk of having negative equity or de facto negative equity (equity minus seller-paid closing costs to sell the property).
2. The availability of zero-down loans removes much of the incentive to save a down payment. While one can always argue that net worth change when buying a home does not, strictly speaking, depend on down payment amount (neglecting mortgage points), the behavioral effect can be a very real factor, in some cases at least.
3. Another behavioral effect of low- and no- down loans is that they encourage a certain entitlement mentality - "woe is me, I can make a mortgage payment but I don't have 20% to put down, but thanks to this great loan program, I was able to buy a home". As a consequence of this, people at least sub-consciously start to see owning a home as a right instead of a privilege that must be earned. When this happens, people can become unwilling to move without a down payment, because to them, renting "is simply not an option on the table". This means even if they have enough equity to sell a previous home, they become "stuck" if they cannot buy another home. Google "negative effective equity" and you see that many people consider themselves immobile if they cannot sell their home and still walk away with enough $$ to buy a new home. This is an indirect consequence of the idea that renting is simply not an option. These people have forgotten that owning a home is not a right, but a privilege.
4. Taxpayer insurance of risky loans is a de facto regressive tax at lower income levels, since people who cannot afford any house at all cannot get the benefit.
5. If you can't save a down payment, how are you going to save for major repairs on the home?
6. I realize that in some areas, home prices are so high that it may take some time to save 20% down. But for some reason when this is used as an argument for low- and no- down loans, the proponent of the argument never considers the possibility that maybe, just maybe, the houses are...overpriced.
7. No- and low- down loans amount to an implicit taxpayer subsidy of bigger homes. Is having more square footage really a worthwhile public policy goal? Square footage also can carry an entitlement mentality with it, with the same issues as simply owning a home.
I got a condo with no money down. My mortgage is $100 lower than my rental payment was. That $100 goes to savings for repairs.
I pay mortgage insurance premiums every month for the life of the loan - no matter how much equity I gain. Doesn't that pay for people who default?
Everyone who doesn't put 20% down has to pay that PMI.
You're just now figuring this out? These types of loans contributed greatly to the crash of the housing market (and the economy) in 2008. The fact that they are coming back just shows how little was learned form that episode. I guess we'll get to bail the big banks out again after they shoot themselves in the foot one more time.
Yep, why should they learn when they know the tax payer will bail them out and to this day as far as I know, not one went to jail. The banks know there are a lot of fools out there that don't have enough sense to know they can't afford that house or think because they exist they are entitled to a house and here we go again.
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