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We bought at the end of 2010 and had a first time home owner program with 3% down with a 3.875% 30 year fixed loan. We had PMI at the time. We have since refinanced and do not have the PMI. Also our interest rate is now 3.25%. Then again in a 6 year time frame our home value went way up. We have about $250,000 in equity now.
Imagine if we had waited to save the 20% down. We would have still been saving and prices went way up since we bought. If we were to buy today we would be far from the 20% needed for our original home price back in 2010. For us it was a win.
My son's tenants just bought a house with zero down. I've seen their credit report and it isn't that good. They had trouble paying their rent on time. They tried to get out of paying their last month's rent because they didn't have the cash for closing. Neither one of them has a really secure job.
None of that makes me feel very secure about the state of the real estate market. My feeling is "Here we go again."
We could see it in our offers. One was a VA loan with 3% down and we said thanks but no thanks. Not putting more down makes the appraisal far too important and depending on the market and either reduce or notch your sales price. Of course we are in a hot market and had multiple offers so it was easy to do...but my point is you can see it.
On a side note why would anyone buy with less than 10% down? Seems like a bad financial decision to me. Of course I refuse to buy with less than 20% and we always buy below our means so I am definitely on the conservative side financially. I just can't see buying a house until you have 20% down and another 10% for repairs when something breaks or a roof leaks.
Every financial situation is different.
We could have put 20% down on the home we purchased last year, but decided to only put 5% down, with a 15 yr mortgage and bank the rest. We sold our home and walked away with a good amount. We used a good amount of those funds to pay off medical bills that we had from my husbands auto accident. The rest we put in the bank for an emergency fund and so that we could do upgrades to our new home without using any credit.
IMHO, the amount of your down payment doesn't matter as much as your credit, your savings reserve and the amount of years you are taking the loan for. I think someone who is able to do a 15 year loan (or less) with 3 or 5% down is in a better financial position than someone who puts 20% down with a 30 year loan. Taking 30 years to pay off a loan is ridiculous!
It was not the size of the down payments that brought on the real estate crash. It was federal laws brought on by congress that caused the real estate crash, which forced mortgage companies to make real estate loans to people that were not qualified to buy homes that caused the crash. The reason for those laws, was Barney Frank a former congressman kept saying we have to help the poor people buy homes. At the end of that cycle, lenders were required by federal law to make 22% of all loans to people that could not qualify for loans under normal lending standards. Lenders had to come up with all types of crazy loans to meet that requirement. George Bush tried to get the laws changed, but Barney Frank kept hollering that he was trying to hurt the poor people, and we had to keep having those requirements to help poor people, and enough Democrats to keep them in force kept saying the same thing like parrots, and Bush could not stop the train wreck of the home meltdown from happening. Either they made bad loans, or they had to stop lending money for mortgages.
This brought on those loans that should never have been made. No credit check loans, and loans were made to anyone that applied. Small payments below even the interest rate for 5 years, and then refinance, and the people were so week they could not refinance. Etc., Etc., Etc. Loans made that never should have been made.
As the poor could buy with these loans, so could anyone else. People with good credit and steady jobs, bought with these loans and bought homes priced far above what they could afford. When 5 years passed and they could not refinance, they were foreclosed. People were not buying homes they could afford, they were buying dream homes, using bad financing that would end up biting them in their rear end, and a lot of good people lost homes they should never have bought in the first place.
There has always been low down loans, even when credit requirements were the most strict to buy homes. I personally used my G.I Bill benefits to buy 4 different homes with a 5% down FHA in the middle in 16 years, with nothing down. We kept moving up to better homes. The last one was in 1970, and with the sellers (developer) to pay $X in closing costs, we got $260 at the closing table as the closing costs were below the amount the sellers were to pay. To be able to use our V.A. loan more than once, we only had to make sure the home was refinanced and our V.A. loan was paid off, our credit was very good, and we had the income to support the purchase.
It was not the amount of the down payment that caused the real estate fiasco, it was federal laws that required lenders to make bad loans on a certain percent of the loans they made to stay in business. The V.A. no money down loans, were some of the best loans ever made and were no problem for the country. The made it possible for a lot of veterans to be able to buy homes for their families as they got out of the service at the ends of wars, and helped get the economy going great. It was kind of a reward for them which debunks any thinking that the size of the down payment is what keeps real estate from crashing. As long as the lenders only make solid loans to people that can afford the homes they buy, the real estate industry is in good shape.
It was not the size of the down payments that brought on the real estate crash. It was federal laws brought on by congress that caused the real estate crash, which forced mortgage companies to make real estate loans to people that were not qualified to buy homes that caused the crash. The reason for those laws, was Barney Frank a former congressman kept saying we have to help the poor people buy homes. At the end of that cycle, lenders were required by federal law to make 22% of all loans to people that could not qualify for loans under normal lending standards. Lenders had to come up with all types of crazy loans to meet that requirement. George Bush tried to get the laws changed, but Barney Frank kept hollering that he was trying to hurt the poor people, and we had to keep having those requirements to help poor people, and enough Democrats to keep them in force kept saying the same thing like parrots, and Bush could not stop the train wreck of the home meltdown from happening. Either they made bad loans, or they had to stop lending money for mortgages.
This brought on those loans that should never have been made. No credit check loans, and loans were made to anyone that applied. Small payments below even the interest rate for 5 years, and then refinance, and the people were so week they could not refinance. Etc., Etc., Etc. Loans made that never should have been made.
As the poor could buy with these loans, so could anyone else. People with good credit and steady jobs, bought with these loans and bought homes priced far above what they could afford. When 5 years passed and they could not refinance, they were foreclosed. People were not buying homes they could afford, they were buying dream homes, using bad financing that would end up biting them in their rear end, and a lot of good people lost homes they should never have bought in the first place.
There has always been low down loans, even when credit requirements were the most strict to buy homes. I personally used my G.I Bill benefits to buy 4 different homes with a 5% down FHA in the middle in 16 years, with nothing down. We kept moving up to better homes. The last one was in 1970, and with the sellers (developer) to pay $X in closing costs, we got $260 at the closing table as the closing costs were below the amount the sellers were to pay. To be able to use our V.A. loan more than once, we only had to make sure the home was refinanced and our V.A. loan was paid off, our credit was very good, and we had the income to support the purchase.
It was not the amount of the down payment that caused the real estate fiasco, it was federal laws that required lenders to make bad loans on a certain percent of the loans they made to stay in business. The V.A. no money down loans, were some of the best loans ever made and were no problem for the country. The made it possible for a lot of veterans to be able to buy homes for their families as they got out of the service at the ends of wars, and helped get the economy going great. It was kind of a reward for them which debunks any thinking that the size of the down payment is what keeps real estate from crashing. As long as the lenders only make solid loans to people that can afford the homes they buy, the real estate industry is in good shape.
Observers and analysts have attributed the reasons for the 2001–2006 housing bubble and its 2007–10 collapse in the United States to "everyone from home buyers to Wall Street, mortgage brokers to Alan Greenspan".[3] Other factors that are named include "Mortgage underwriters, investment banks, rating agencies, and investors",[4] "low mortgage interest rates, low short-term interest rates, relaxed standards for mortgage loans, and irrational exuberance"[5] Politicians in both the Democratic and Republican political parties have been cited for "pushing to keep derivatives unregulated" and "with rare exceptions" giving Fannie Mae and Freddie Mac "unwavering support". https://en.wikipedia.org/wiki/Causes...housing_bubble
To single out one person as the cause is ridiculous. and No one was forced to take out a mortgage on a home they could not afford.
But you are right that the size of the down payment was not the cause.
There is a difference between 5% not being possible, which it is and always has been, and you (or the property) not qualifying for 5%.
You said you bought a condo. Many times, condos are non-warrantable and are a higher risk to the lender so they require a larger down payment. Many times a borrower's credit score does not qualify for programs that are available to other people.
5% down was alive and well in 2013. You didn't qualify for it. And no, it's not a "norm". Some people put down 5%, some put down 10 or 20%. Some people put down a mere 3% for conventional or 3.5% for FHA.
this.
there was a period in late 2008-mid-2009 when for many price ranges, the only lender under a 20% downpayment was FNMA based. But soon enough thereafter, a 5% down conventional loan to the conventional loan limit by locale has been available
There is nothing morally wrong with buying a house with no money down. If you can get it, more power to you.
What the rest of us are worried about is the banks that are lending with no money down to people who probably can't pay. Personally, I think it is unethical to loan money to people who can not afford it. It is also exceptionally bad business to do a real estate loan where you have a larger than normal chance of getting the house back with absolutely no equity in it at all. It is financial malfeasance to the stock holders of that bank.
It is also exactly what caused the last real estate market crash that brought down the entire economy. It's a really poor business model.
You're not making sense. If the transaction is harmful, then why doesn't the borrower share some of the blame with the banks for such a risky practice? Remember it takes two parties to make the deal - the lender and the borrower.
What a joke. All the doom and gloom stuff they talk about is always a possibility.
People will always lose a job, always get sick, etc...
And I love how they talk about things that may stall or reverse the "recovery" of the housing market which just proves the greed driven agenda. Recovery? Really? These clowns want pre bubble burst and beyond market values. Housing hasn't truly been "affordable" in god knows how many years. Creating a bubble only ensures a burst at some point, but whatever.
Observers and analysts have attributed the reasons for the 2001–2006 housing bubble and its 2007–10 collapse in the United States to "everyone from home buyers to Wall Street, mortgage brokers to Alan Greenspan".[3] Other factors that are named include "Mortgage underwriters, investment banks, rating agencies, and investors",[4] "low mortgage interest rates, low short-term interest rates, relaxed standards for mortgage loans, and irrational exuberance"[5] Politicians in both the Democratic and Republican political parties have been cited for "pushing to keep derivatives unregulated" and "with rare exceptions" giving Fannie Mae and Freddie Mac "unwavering support". https://en.wikipedia.org/wiki/Causes...housing_bubble
To single out one person as the cause is ridiculous. and No one was forced to take out a mortgage on a home they could not afford.
But you are right that the size of the down payment was not the cause.
Wikipedia is not a credible source. Anyone can write one of their pags.
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