Buy Your New House SOONER Rather Than Later

[Missy]

Good luck Rissa! It will all work out even if it takes a bit more time.

 

[iheartscience]

Rissa Lou: as far as I can tell, the programs haven't changed yet. I'm sure you could still get an FHA loan. I'm hoping you're not letting a post on Pricescope change your plan.

 

[iLander]

I agree with you that housing prices will continue to go down in many parts of the country, but I think you have to parse it finer than that. Housing prices are coming back in a large number of desirable neighborhoods; my area has prices up almost 9% over last year. Meanwhile, across town, in the poorer areas housing prices are still sliding. There are areas of NYC (for example) that are up 15% over last year, and areas that are down 12%. The deciding factor seems to be that areas that were always desirable, are recovering. Marginal areas that were heavily developed with $250K houses, where only $70K houses existed before the boom, are still dropping to get back to the $70K they should have been in the first place. This is dragging a lot of the overall averages down. If you are considering buying, then check prices in your particular neighborhood very carefully. Chances are, if it's a good, solid area, you'll find out that prices are firming up and possibly rising.

I think the real estate market will recover in our lifetimes, because it is doing so right now, in desirable neighborhoods.

It won't help a friend of mine who panicked and paid $250K (at the height) for a house that would NOT have been worth more than $100K in a normal market. Her kitchen is so small that she can't fit a full size fridge (this is a tiny house, not a condo) in her kitchen. She was afraid she was going to be priced out. Her house will have to drop -- what, 100%?-- to get to a realistic cost.

I think prices will continue to drop in areas where peak prices were incredibly unrealistic.

Look, I'm replying to myself!

Actually, I wanted to point out to readers of this thread, an article that just came out saying that expensive properties are going up all over the US, which reinforces what I said above.

http://finance.yahoo.com/news/Milliondollar-homes-sales-cnnm-687577347.html?x=0

"The rich are different from you and me: They're buying real estate.

After four straight years of declines, sales of million-dollar homes and condos rose last year in all 20 major metro areas, according to DataQuick Information Systems. On average, these cities saw an 18.6% jump in high-end home sales.

San Jose, Calif., had the biggest market for million-dollar homes, with a 27.4% spike in sales last year; Phoenix saw the smallest increase at just 0.4%."

This isn't meant to make anyone feel bad that they can't afford a million dollar home (I know I can't), it's to provide a little reassurance to those that are worried about the real estate market overall.

I--me, myself, personally--feel the bottom has been reached in desirable areas.

 

[RissaLou]

Rissa Lou: as far as I can tell, the programs haven't changed yet. I'm sure you could still get an FHA loan. I'm hoping you're not letting a post on Pricescope change your plan.

Oh no no. I'm just thinking that worse case sernario I have to wait a bit longer and that would not be the end of the world. I still prefer to buy sooner rather than later just becasue where I live a person ends up paying more in rent than in a mortgage, and I'd rather the extra funds go into my home than down the trash.

 

[D&T]

please remember there are still quite a bit of SHAWDOW Foreclosure inventory still left on the books and with Bank of America holding quite possibly the largest of it all, which could possibly still reduce prices, therefore there may be a slight increase in some areas, but most likely there will be another drop, this is my opinion and opinions of other associates in real estate and mortgage sector. Not only residential is hurt, but commercial properties is also and commericial will stabilize once residential turns. Buy when you are ready, save what you can, mortgage less than you are preapproved for.

 

[elrohwen]

D&T, your last comment, about buying less than you're preapproved for, reminded me of something:

We got preapproved recently since we're looking for houses, and the lender we talked to didn't give us a number we were preapproved for - he just said we were approved for the price estimate I put on the form. He said we could have more than that, but never gave us a number. I think it's a much better idea to let people decide what they can afford, then tell them if you'll lend that amount.

Some friends hadn't sold their first house when they bought a second (expensive) house and were still preapproved for over one million for their second home Sure they make good incomes, but in their words there's no way they should be spending a million on a house, especially since they had another mortgage to pay. But those were the days of the boom, and things are so different now.

 

[Allison D.]

Gosh, I hope no one's buying into this "there's only one responsible way to buy a house, and that's 20% down" rhetoric.

There is no 'magic' percentage of downpayment that guarantees success in repaying loans. Sure, it's always a good idea to put down as much as you can because it lowers the amount you're paying interest on and because the less you finance, the more reasonable the payments can be. That said, though, the most compelling indicator to ME that determines whether or not a purchase makes sense is very simply this: Regardless of downpayment amount, can you *comfortably* afford the monthly mortgage payment?

Hub and I are a prime example. We purchased with 10% down and financed 90% in fixed rate 30-year loans - 80% primary mortgage and 10% secondary (HELOC). The combined monthly mortgage payment for both loans amounted to just 22% of our take-home income. We could easily swing the monthly payments. We paid off the other 10% (the second) within 2.5 years; if we had waited to buy until we had the full 20% down up front, we'd have wasted $47.5K on rent during that time; instead, that $$ went to paying the first 2.5 years of our mortgage.

The fact that we chose to put down 10% was not an indicator of our ability to afford/pay for our home. That was all about "can we comfortably hit the monthly payments?" THAT is the key question. YES, it totally makes sense that it's harder for people to walk away from their home when they have a reasonable amount invested in it, but there is no single magic "right" percentage.

The mortgage crisis occurred largely because people bought beyond their means; they purchased homes that were only affordable with an artifically low initial interest rate and speculated that their income would rise enough to make the payments affordable when the rate went up to a standard rate.

If you reach a point where the mortgage payment exceeds what you can comfortably pay, whether you put down 5%, 10% or 20% is irrelevant. If you can't make the payments, you can't make them.

 

[iheartscience]

Gosh, I hope no one's buying into this "there's only one responsible way to buy a house, and that's 20% down" rhetoric.

There is no 'magic' percentage of downpayment that guarantees success in repaying loans. Sure, it's always a good idea to put down as much as you can because it lowers the amount you're paying interest on and because the less you finance, the more reasonable the payments can be. That said, though, the most compelling indicator to ME that determines whether or not a purchase makes sense is very simply this: Regardless of downpayment amount, can you *comfortably* afford the monthly mortgage payment?

Hub and I are a prime example. We purchased with 10% down and financed 90% in fixed rate 30-year loans - 80% primary mortgage and 10% secondary (HELOC). The combined monthly mortgage payment for both loans amounted to just 22% of our take-home income. We could easily swing the monthly payments. We paid off the other 10% (the second) within 2.5 years; if we had waited to buy until we had the full 20% down up front, we'd have wasted $47.5K on rent during that time; instead, that $$ went to paying the first 2.5 years of our mortgage.

The fact that we chose to put down 10% was not an indicator of our ability to afford/pay for our home. That was all about "can we comfortably hit the monthly payments?" THAT is the key question. YES, it totally makes sense that it's harder for people to walk away from their home when they have a reasonable amount invested in it, but there is no single magic "right" percentage.

The mortgage crisis occurred largely because people bought beyond their means; they purchased homes that were only affordable with an artifically low initial interest rate and speculated that their income would rise enough to make the payments affordable when the rate went up to a standard rate.

If you reach a point where the mortgage payment exceeds what you can comfortably pay, whether you put down 5%, 10% or 20% is irrelevant. If you can't make the payments, you can't make them.

Great post, Allison-I agree 100%.

 

[Missy]

There is *no* magical down payment number. That number varies (depending on your salaries, other investment incomes, other debts and expenses etc) but in general the higher the down payment the better off you are regarding the stability of your investment and ability to complete payments. In other words, the closer you are to paying off your mortgage in full.

Gosh, I hope no one's buying into this "there's only one responsible way to buy a house, and that's 20% down" rhetoric.

There is no 'magic' percentage of downpayment that guarantees success in repaying loans. Sure, it's always a good idea to put down as much as you can because it lowers the amount you're paying interest on and because the less you finance, the more reasonable the payments can be. That said, though, the most compelling indicator to ME that determines whether or not a purchase makes sense is very simply this: Regardless of downpayment amount, can you *comfortably* afford the monthly mortgage payment?

Seems very similar to what some of us have been saying all along...

And of course being able to afford (without hardship) the monthly payments is key. I think we all agree on that as well.

 

[Allison D.]

Seems very similar to what some of us have been saying all along...

And of course being able to afford (without hardship) the monthly payments is key. I think we all agree on that as well.[/quote]

Actually, not all DO agree with that, which is why I made the post. There were at least a few posts suggesting that a house isn't affordable unless/until you have 20% down. While that may not have been your post, it was suggested by at least a few participants, and since I disagree I felt it worthwhile to add my contribution.

 

[Missy]

Seems very similar to what some of us have been saying all along...

And of course being able to afford (without hardship) the monthly payments is key. I think we all agree on that as well.[/quote]

Actually, not all DO agree with that, which is why I made the post. There were at least a few posts suggesting that a house isn't affordable unless/until you have 20% down. While that may not have been your post, it was suggested by at least a few participants, and since I disagree I felt it worthwhile to add my contribution.

Hey Allison,
I agree with your points however I still feel it is safer to put more down on a home because too many people live on credit and live month to month just barely making the monthly payment. Not you of course and not most here but I am just saying that if you live in a way that thinks about the real total cost of something than the logic of putting down as little as possible is fundamentally flawed. Think about how much more your mortgage will cost you over the course of 30 years if you (not you specifically just the collective you) are putting so little down.

I believe it is better all around to put as much down as you can afford. It is safer for the banks and it is smarter for you over the course of the loan.

Missy

 

[Allison D.]

Hey Allison,
I agree with your points however I still feel it is safer to put more down on a home because too many people live on credit and live month to month just barely making the monthly payment. Not you of course and not most here but I am just saying that if you live in a way that thinks about the real total cost of something than the logic of putting down as little as possible is fundamentally flawed. Think about how much more your mortgage will cost you over the course of 30 years if you (not you specifically just the collective you) are putting so little down.

Missy[/quote]
Missy, I think you misunderstand. I'm not saying it's not a good idea/safer/whatever to put down as much as one can, and I've said as much. What I'm saying is, it may not ALWAYS make financial sense to defer until one has 20% down, and that there's no one RIGHT way. What works for you may not work for me, and vice versa.

With respect, I DO live in a way that thinks about the REAL TOTAL COST of something, and that's why we decided to buy with 10% down instead of continuing to rent/save the other 10%. Maybe an explanation of the math will help you see it.

We borrowed the extra 10% through our second mortgage, which we paid off in 2.5 years. We paid a total of $5K in interest, but we saved $47,500 in lost rent money.

What I'm trying to say is this: At the time we purchased, we had 10% in hand. It would take us another 2.5 years to save the other 10% whether we put it in the bank while renting or paid it to the second mortgage holder while living in our HOME. If we had waited, we'd have paid $47.5K in rent; instead we paid it toward our mortgages (most of which was applied against the 80% primary that we'd have owed even with 20% down). However, at the end of that 2.5 years, instead of embarking on a 30-year mortgage, we are already 2.5 years into our 30-year mortgage.

To me, thinking only about the total cost of the house/downpayment isn't thinking about the total real cost of ALL things. Cost to rent while you save is a very real cost.

 

[Allison D.]

Hey Allison,
I agree with your points however I still feel it is safer to put more down on a home because too many people live on credit and live month to month just barely making the monthly payment.

I meant to also say that I agree too many people live on credit and live month to month, but that has no relevance on how much they put down. That's about financial discipline, and one either has that or he doesn't. It doesn't magically come only to those who put 20% down. Heck, there are some people who could put down 20% (inheritance, family gift, etc.) who are terrible at handling money and don't have the discipline to live within their means. Those people will still have trouble paying their mortgages even though they put 20% down

Maybe it will resonate more this way: I agree that it's USUALLY better to put down as close to the suggested 20% as one can, but I don't agree that it's ALWAYS the best choice given all other factors.

 

[zoebartlett]

Allison -- Thank you for chiming in! I was reading this thread, thinking about the conversation you and I had about house-buying when we got together a couple years ago. I have to say, I'm reading this thread shaking my head. There's not one right way to buy a house, and it doesn't mean one is irresponsible if he/she does it differently than someone who put a lot of $ down. Sure, it's great to be able to put $ down, but I think it comes down to whether you can comfortably afford the monthly mortgage payments, taxes, and possible HOA fees.

As for my own experience, my husband and I bought a condo 5 years ago (that we're currently renting out). We didn't put any $ down. In hindsight, it would have probably been better to put *something* down, but we didn't. We knew going in that once we added up the monthly mortgage payments, our property taxes, and monthly HOA fees, we could comfortably afford our condo. If not, we wouldn't have bought the place. Housing prices in our area are very expensive (well, at least to us). There's no way we could have saved enough to put 20% down. Does that make us irresponsible home owners? Nope.

We bought when the market was high, and unfortunately, we're upside down right now. We've been thinking about selling it as a short sale, but we haven't looked into that in a while. That's a whole other story (that I've posted about here).

 

[Missy]

As for my own experience, my husband and I bought a condo 5 years ago (that we're currently renting out). We didn't put any $ down. In hindsight, it would have probably been better to put *something* down, but we didn't. We knew going in that once we added up the monthly mortgage payments, our property taxes, and monthly HOA fees, we could comfortably afford our condo. If not, we wouldn't have bought the place. Housing prices in our area are very expensive (well, at least to us). There's no way we could have saved enough to put 20% down. Does that make us irresponsible home owners? Nope.

We bought when the market was high, an unfortunately, we're upside down right now. We've been thinking about selling it as a short sale, but we haven't looked into that in a while. That's a whole other story (that I've posted about here).

Sorry you are dealing with this Zoe. I hope it works out for you guys.

I agree that it's USUALLY better to put down as close to the suggested 20% as one can, but I don't agree that it's ALWAYS the best choice given all other factors.

I do agree with this Allison. I don't think there is only one way to do something but I do think there is often a better way. However, as long as someone is financially stable and responsible I agree that there are a variety of choices available. And for you, given your situation, you chose the best path for you and your dh and I am glad you were able to purchase your home.

 

[zoebartlett]

Thanks Missy.

 

[ksinger]

I'm glad we've finally all agreed that there really IS more than one way to skin a cat. The only thing making a loan good, is the due dilegence on the part of the lendor, and the common sense and ethics of the borrower, not how much money is or is not put down.

On another tack...

I always find it interesting that these threads usually devolve into people pointing fingers at other people. I'm sure the people who actually got us into this mess, are chuckling evilly. How better to divert attention away from themselves, than to recast the dialogue so that the plebs argue and fight amongst each other.

I liken the banks in this situation, to drug pushers, or cigarette manufacturers, all pushing poison for their own profit. And push it they did. Hugely. I don't often link a wikipedia page but this one is unchallenged and documented and linked out the yinyang. I highly suggest the sections entitled "Homeowner speculation" and espcecially, "High-risk mortgage loans and lending/borrowing practices".

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

Here is an excerpt from the "High-risk" section. By this you may indeed assume I lay the lion's share of the blame for this mess, on BANKS and aggressive marketing, among other things like people, who by virtue of education and income, should have known better than to be speculating with housing. They may have gotten off the train before it crashed, but they too, put it on a track over the gorge. Bottom line, people could not have gotten stupid loans, if banks had not created them and then been willing to give them, and towards the end, they were giving them without even the hint of verfication of income or assets. So yes these people were stupid to take out a loan like that, but the person in the room with the greater knowledge and POWER, rolled over and played dead on their duty to handle their own money wisely.

begin excerpt:
So why did lending standards decline? In a Peabody Award winning program, NPR correspondents argued that a "Giant Pool of Money" (represented by $70 trillion in worldwide fixed income investments) sought higher yields than those offered by U.S. Treasury bonds early in the decade. Further, this pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income generating investments had not grown as fast. Investment banks on Wall Street answered this demand with financial innovation such as the mortgage-backed security (MBS) and collateralized debt obligation (CDO), which were assigned safe ratings by the credit rating agencies. In effect, Wall Street connected this pool of money to the mortgage market in the U.S., with enormous fees accruing to those throughout the mortgage supply chain, from the mortgage broker selling the loans, to small banks that funded the brokers, to the giant investment banks behind them. By approximately 2003, the supply of mortgages originated at traditional lending standards had been exhausted. However, continued strong demand for MBS and CDO began to drive down lending standards, as long as mortgages could still be sold along the supply chain. Eventually, this speculative bubble proved unsustainable. NPR described it this way:[94]

The problem was that even though housing prices were going through the roof, people weren't making any more money. From 2000 to 2007, the median household income stayed flat. And so the more prices rose, the more tenuous the whole thing became. No matter how lax lending standards got, no matter how many exotic mortgage products were created to shoehorn people into homes they couldn't possibly afford, no matter what the mortgage machine tried, the people just couldn't swing it.] By late 2006, the average home cost nearly four times what the average family made. Historically it was between two and three times. And mortgage lenders noticed something that they'd almost never seen before. People would close on a house, sign all the mortgage papers, and then default on their very first payment. No loss of a job, no medical emergency, they were underwater before they even started. And although no one could really hear it, that was probably the moment when one of the biggest speculative bubbles in American history popped.

 

[Allison D.]

[It should always be a requirement IMO to place at least 25% down on a home. People who cannot afford to do this cannot afford to purchase their home IMO. It constantly shocks and amazes me that some people buy homes with nothing down or as little as 5 or 10% down. I mean what kind of fiscal responsibility is that person showing? This is what caused the real estate downfall IMO and I still see it happening!

Well....soooooooooo I went back and read the thread more carefully, and realized that YES, Missy, you indeed were among those saying "if you can't afford to put down 25%, you can't afford to purchase a home." Oh, and the also choice "people who put down 5-10% are showing a lack of fiscal responsibility".

It's this kind of "my way is the only right way" thinking that really gets my back up. Saying that one one cookie-cutter formula is the "best" for all is tantamount to trying to automate decision-making. Sounds like a great plan, except it eliminates EXERCISING sound judgment and turns away from the "total picture" thinking you say you value.

I HEARTILY disagree with the quoted above. While I've used my own situation as an example in above posts, I know fully that there are a myriad of others who've also bought with less than 20% down who have similarly rpaid their mortgages *responsibly* on time every month. To suggest that any of these people demonstrated a lack of fiscal responsibility is frankly irresponsible on your part. You claim to be be a "total picture" thinker, but the notion that only those who can put down 25% on a home purchase are fiscally responsible is an incredibly tunnel-visioned stance.

I'm reeeeeeeeeally curious now - what about people who choose to put down the MAGIC percentage but don't think to leave enough cash reserves on hand to handle repairs that might arise? And then when the repair bill does come, they're struggling to cover that AND the mortgage payment? There are MANY different ways to be fiscally irresponsible.

 

[ksinger]

[It should always be a requirement IMO to place at least 25% down on a home. People who cannot afford to do this cannot afford to purchase their home IMO. It constantly shocks and amazes me that some people buy homes with nothing down or as little as 5 or 10% down. I mean what kind of fiscal responsibility is that person showing? This is what caused the real estate downfall IMO and I still see it happening!

Well....soooooooooo I went back and read the thread more carefully, and realized that YES, Missy, you indeed were among those saying "if you can't afford to put down 25%, you can't afford to purchase a home." Oh, and the also choice "people who put down 5-10% are showing a lack of fiscal responsibility".

It's this kind of "my way is the only right way" thinking that really gets my back up. Saying that one one cookie-cutter formula is the "best" is tantamount to trying to automate decision-making, and that allows people to throw otherwise sound thinking out the window.I HEARTILY disagree. While I've used my own situation as an example in above posts, I know fully that there are a myriad of others who've also bought with less than 20% down who (like me) have responsibly paid their mortgages on time every month. To suggest that any of these people demonstrated a lack of fiscal responsibility is frankly irresponsible on your part. You claim to be be a "total picture" thinker, but the notion that only those who can put down 25% on a home purchase are fiscally responsible is an incredibly tunnel-visioned stance.

I'm reeeeeeeeeally curious now - what about people who choose to put down the MAGIC percentage but don't think to leave enough cash reserves on hand to handle repairs that might arise? And then when the repair bill does come, they're struggling to cover that AND the mortgage payment? There are MANY different ways to be fiscally irresponsible.

LOL! You mean like the banks abdicated on sound thinking and decision making when they did ninja loans and robo approvals and offered loans to anyone with a pulse? Yeah...

The financial market and mortgage meltdown is SO much more complex with so many more and more important "causes" than who was able to put 25% down on a mortgage. I'm glad other people see that too.

 

[iLander]

@KSINGER: Totally agree with you on this. I think this country is being run into the ground by Wall Street and their hunger for more and bigger yields. Your article pointed out that if Wall St didn't have a product of value they just made one up.

They are STILL doing it, this from the Wall St Journal:

Wall Street Bets on Debt That Doesn't Exist

Fresh from Wall Street's alchemy labs: Credit derivatives tied to General Motors Co. debt. The rub is, no such debt exists.

Banks and hedge funds are trading credit-default swaps, which make payments to holders of General Motors bonds in the event of a default. But GM canceled $40 billion of debt in bankruptcy and has pledged to cut its remaining $4.6 billion bank loan to the bone this year.

That is merely a technicality for the banks and hedge funds that have been actively trading the CDS.

http://online.wsj.com/article/SB10001424052748704430304576170710897188504.html?mod=dist_smartbrief

Amazing, isn't it? They are out right lying, basically committing fraud, and we have no one to say "Hey! Stop that!" There is no integrity in Wall Street, there was no integrity in the mortgage brokers, no integrity at any point down the road to ruin.

I read an article about a lady that made $50K a year, and was encouraged to take out a $500K loan. We are somehow supposed to blame only her. We are not supposed to pay any attention to the man behind the curtain, the guy that's handing her the pen, the ultimate villian; Wall Street.

Whole thing makes me REALLY mad.

 

[ksinger]

Yeah, I was just remembering way back to '98 when I made my loan, you know - under those "traditional" boring old lending standards that had worked for decades. Lessee... you had conventional 20% down 20 or 30 year notes with a limit up to (hard to recall but I'm trying) about 400,000. After that you had jumbo loans which of course I didn't pay attention to. You also had FHA loans with 3% down + closing (so really my loan was not no-down) and much lower upper limits - I'm thinking up to 175,000? But I know one thing, if I had walked in and asked for a 250,000 note, with the verification they did, plus the limited loan types available, I would have been shown the door. I couldn't have gotten into real trouble financially if I'd tried. And there folks, are bankers doing THEIR JOBS. They make sure their money is loaned wisely, and I - even if I'm stupid - benefit too. How hard is that?

edited for spelling...sheesh.

 

[diamondseeker2006]

When our daughter graduated from college and got a job, the choices for her were a 2 br apt. for $750 a month or buy a little house for $125k with a small down payment...total monthly payment incl. taxes and ins.=$750. She was going to have a roommate either way to help her with expenses. It was a no-brainer. Three years later and she is married and they still live in the little house and are happy to be building equity.

This whole thing boils down to people buying much more expensive homes than they can afford (meaning monthly payments). We always bought what we could afford on my husband's income alone. It never crossed our mind to buy a home for any other reason than it being a place to live. We generally always had less than a 30 year mortgage and made extra payments to pay off our last house early. When the market dropped, we took the opportunity to buy a new house is a desirable area and have our old home on the market.

I do not believe tax-payers have any obligation to pay someone else's mortgage. The banks DO need to be conservative about lending money. And people need to adjust their thinking to not having to have that 4 br. home as their first home. The number of foreclosures in the higher end homes blew my mind when we were looking for our new home.

The same can be said for 6 year car loans. What are people thinking???!!! Greed and materialism have fueled all these problems. And the banks facilitated the whole thing by extending almost unlimited credit to people who didn't have the sense to realize what they could and could not afford. And I'm with people like JewelFreak who feels no particular responsibility to pay for others' irresponsibility!!!!

 

[Missy]

I would like to amend something I wrote...I think one should live not within their means but that we should live well under what we can afford. Times have changed since some of us have purchased homes and while I was trying to be diplomatic before and trying not to offend people who disagree I will just agree to disagree with those who think it is perfectly safe to put as little down as deemed necessary.

Thanks for allowing me to share my (unpopular ) opinion. We all have the freedom to live as we see fit and do what works best for us.
I know there will always be exceptions to the rule but that does not make it true for most. And Allison, it really gets my back up when people who live beyond their means expect others to clean up their mess!

Oh and I never said that it was sufficient to put 25% down. I think it is only 1 part of the total picture. Of course you should have sufficient. reserves etc. Necessary not sufficient....big difference. And ofc there will always be exceptions.

BTW I am writing on my android phone so apologies for typos etc.

 

[iheartscience]

[It should always be a requirement IMO to place at least 25% down on a home. People who cannot afford to do this cannot afford to purchase their home IMO. It constantly shocks and amazes me that some people buy homes with nothing down or as little as 5 or 10% down. I mean what kind of fiscal responsibility is that person showing? This is what caused the real estate downfall IMO and I still see it happening!

Well....soooooooooo I went back and read the thread more carefully, and realized that YES, Missy, you indeed were among those saying "if you can't afford to put down 25%, you can't afford to purchase a home." Oh, and the also choice "people who put down 5-10% are showing a lack of fiscal responsibility".

It's this kind of "my way is the only right way" thinking that really gets my back up. Saying that one one cookie-cutter formula is the "best" for all is tantamount to trying to automate decision-making. Sounds like a great plan, except it eliminates EXERCISING sound judgment and turns away from the "total picture" thinking you say you value.

I HEARTILY disagree with the quoted above. While I've used my own situation as an example in above posts, I know fully that there are a myriad of others who've also bought with less than 20% down who have similarly rpaid their mortgages *responsibly* on time every month. To suggest that any of these people demonstrated a lack of fiscal responsibility is frankly irresponsible on your part. You claim to be be a "total picture" thinker, but the notion that only those who can put down 25% on a home purchase are fiscally responsible is an incredibly tunnel-visioned stance.

I'm reeeeeeeeeally curious now - what about people who choose to put down the MAGIC percentage but don't think to leave enough cash reserves on hand to handle repairs that might arise? And then when the repair bill does come, they're struggling to cover that AND the mortgage payment? There are MANY different ways to be fiscally irresponsible.

Ditto AGAIN. Missy, you keep backtracking and saying "Not people on Pricescope, but OTHER PEOPLE," but clearly there are plenty of people on Pricescope AND elsewhere who went with FHA loans and other, lower down payment loans and are just fine. I put down less than 20% because I chose to hang onto some investments that were performing really well instead of selling them, and I wanted to keep a decent amount of cash on hand in case of any repair/updates since my house was built in 1920. Guess what? That was 100% the right choice because the investments continued to perform well and still are, earning a return much greater than the interest rate on the loan.

Your way isn't the only responsible way, as has been shown by many posters. And I doubt we're ALL exceptions to a rule. You're certainly entitled to your opinion but I don't think you're entitled to sit here and call other people fiscally irresponsible or tell other people they don't deserve a house until they can put down 25%.

 

[Allison D.]

I would like to amend something I wrote...I think one should live not within their means but that we should live well under what we can afford. Times have changed since some of us have purchased homes and while I was trying to be diplomatic before and trying not to offend people who disagree I will just agree to disagree with those who think it is perfectly safe to put as little down as deemed necessary.

I guess agreeing to disagree makes the most sense here since I can't agree with those who think that *safety* is measured solely by the percentage of downpayment without considering ALL other factors of a person's financial picture (can comfortably make monthly payments, has a savings cushion for repairs, is otherwise largely debt-free).

And Allison, it really gets my back up when people who live beyond their means expect others to clean up their mess!

I fully agree with you on this.....but just for clarification, that mess wasn't created largely by people who chose to put down less than 20-25%. It was created by people who took on more than they could pay for, REGARDLESS OF WHAT THEY PUT DOWN (and FYI, this group included by BOTH people who put down 20% and people who put down less.

And I'm damn sure *I* didn't contribute to the mess.....which FYI, I'm ALSO paying for.

Oh and I never said that it was sufficient to put 25% down.

No.....what you said is that people cannot afford homes if they don't put down at least 25%....AND that they are being financially irresponsible, neither of which is necessarily true and which I vehemently disagree with. So yes, let's just agree to disagree. It's proabably best.

 

[Allison D.]

Your way isn't the only responsible way, as has been shown by many posters. And I doubt we're ALL exceptions to a rule. You're certainly entitled to your opinion but I don't think you're entitled to sit here and call other people fiscally irresponsible or tell other people they don't deserve a house until they can put down 25%.

Leave it to Thing2 to get to the point much better than I.

Wholeheartedly agree with every.single.letter of this comment by Thing2.

 

[Demon]

I'm glad our lender didn't think we were too fiscally irresponsible to own a home. We put down 5%, have been there since 1993, have never missed a payment - on the house or anything else.

 

[Lynnie]

I am one of those - ahem - 3.5% down FHA loan takers. All the details are in the house hunters thread. Does that make me unresponsible? I don't think so.

As others have said, if you can't afford the monthly payment, then DON'T BUY A HOUSE. Our mortgage payment (including PMI, taxes and insurance) is 26% of our take home pay. Totally manageable, for us. We have no debt other than the house and the car (which we took out a 2 year note on, so that will be paid off next summer).

Our car died on us the month we moved in... our 8K rebate from Obama would've gone right back to the mortgage had we not needed a car! We do biweekly payments, plus we make additional payments as we can. And once the car is paid off, we'll be slapping that $ every month on the mortgage. Do I hate the PMI and ridiculous interest? Absolutely. But it would've cost us probably in the neighborhood of $30000 in rent and 4 years to save 20%... maybe more, since we have a child now and would've needed more room.

DH and I were 27 when we bought, and have very stable careers and incomes. And we are financially responsible.

At the time, it made much more sense to buy w/ little down, than to continue renting. I am happy, I LOVE where I am (in my little semi detatched!), and am NOT living paycheck to paycheck.

So yes, it sure as heck can be done!!

IF they phase out 30 year mortgages, there'll be a lot of people SOL. I would've been.

 

[Dancing Fire]

[

LOL! You mean like the banks abdicated on sound thinking and decision making when they did ninja loans and robo approvals and offered loans to anyone with a pulse? Yeah...
The financial market and mortgage meltdown is SO much more complex with so many more and more important "causes" than who was able to put 25% down on a mortgage. I'm glad other people see that too.

oooh c'mon Ksinger,stop blaming the banks,yes the banks offer these people drugs,but these people don't have to become a user stop blaming the supplier ...

 

[Demon]

[

LOL! You mean like the banks abdicated on sound thinking and decision making when they did ninja loans and robo approvals and offered loans to anyone with a pulse? Yeah...
The financial market and mortgage meltdown is SO much more complex with so many more and more important "causes" than who was able to put 25% down on a mortgage. I'm glad other people see that too.

oooh c'mon Ksinger,stop blaming the banks,yes the banks offer these people drugs,but these people don't have to become a user stop blaming the supplier ...

The supplier has no culpability, only the user? Does that hold true for prostitution? Drug deals? (one could argue that these things are illegal and the loans weren't, but IMO, some of them should be!)