Home ownership: For the white and rich

I'd be worried about what that could do to housing prices.

 

At some point, and maybe this is not the point yet given all the other crap going on in the economy, but at some point the housing market is going to have to stand on its own, on firm principles again. Everything happening now -- the first-time buyer credit that gooses sales up and down, the "shadow market" of foreclosed homes that banks won't sell, artificially limiting supply, the idea of keeping as many people as possible eligible for loans that they still may not be able to afford -- is working against the idea of long-term stability and correction.

 

I think like most everyone else, you'd get over it pretty quickly. It's all business.

 

It goes beyond personal accountability. The market was manipulated, which affected buyers' mindsets.

I know I was hesitant about buying a house (just when the market was starting to rise). My wife basically said, "If we don't buy now, we'll never be able to afford it!"

Our house's value, which was bought for slighty over $100K, ended up nearly doubling at the peak of the boom, and is now appraised at around $160K. We ended up originally putting 3 percent down, then we had to put more when the bank appraisal was less. So we ended up paying, something like 8 or 9 percent down.

But there was no way we would have been able to afford it a year or so later. My salary sure as heck didn't double.

Which is why I'd be in favor of, say, 10 percent down, with the monthy payment limit of 33 percent. It wouldn't be as drastic a move, and it would install some standards.

 

Manipulation? Shell games.

Still, one plus one has always equaled two. Which is what makes these people easy prey.

 

The problem now isn't subprime buyers. A lot of those people washed out a long time ago. The problem now is unemployment and tight credit. People are losing their homes because they're losing their jobs, or getting paid less. And people can't buy homes because you have to put so much down, and because you don't feel like you can count on your job being there 10 years from now, and because the rental market in many areas is such that rents are going up, so you have less to set aside for a home. Also, a lot of people are just giving up the ghost on buying because in a down market, it's a lousy investment.

 

not sure how i feel because i usually have the philosophy of more personal freedom of choice rather than the government telling you what to do. and no offense to anyone here but i just can't see not putting at least 20% down. do people ever calculate how much in interest they end up paying when they put less down. i know it is the american dream and it sucks to realize i can't afford a home but i just think more people would be better off saving and putting more down. (yes i know when jobs are hard to find and pay sucks that is difficult). just from personal experience i waited until i was 30. most of my friends were 25-28. i wanted to have a house and not a 1 bedroom apt when they had houses but i thought it was best to save until i could put down more.

 

20% is a large burden. I put down 10% each time I purchased a home. It means I've had to pay PMI but it allowed my wife and I to start putting our money toward our home instead of a landlord. We knew exactly what we could afford in a monthly payment. If we would have had to put 20% down, we would have had to cut back on our 401k and retirement savings.

The no money down mortgages are crazy and probably needed to be stopped but there needs to be some sort of personal financial freedom that allows you and your bank to accept certain levels of risk. By not putting down 20%, it means my wife and I have to pay PMI, but we considered that worthwhile rather than giving our housing payment to our landlord.

 

Term of the loan is much more important than how much you put down.

Put 20 percent down over 30 years, and you are still paying a shitload of interest.

Put 10 percent down over 15 years (or better yet, 10 years), and you're paying very little interest. I'm paying $13,000 interest on a $116,000 loan. That same loan over 30 years would cost me $114,000 in interest. $100K flushed down the toilet.

But people don't want to look past the "payment".

$800 a month? We can manage that. $1,000 a month? Too scary. So they pay $800 a month for 30 years and pay $300,000 for a $130,000 home instead of $200,000. $100K flushed down the toilet.

If the 15-year term truly gets to be unmanageable, you can always scale it back to 20 or 25. But once you adjust your budget --- and see that principal quickly reducing every month --- you'll make it work. And in a 3.75% interest rate environment, there really is no excuse not to go 15 years.

 

I was approved for $250K back in 2006 for an ARM, but bought a $100K house (in one of America's cheapest housing markets, so its not some shack) with a FRM. Best move we ever made.

Most of the houses in our neighborhood are the same, so we haven't had the abandonment syndrome that's gone on elsewhere.

Houses are an investment, but only partly, because its an investment you'd better be prepared to live with for a long time if the investment doesn't pan out. In other words, if you only have the means to own one house, buy it to live in, not to flip three years down the road.

 

That is great advice by Bubbler. People think they can flip houses because they saw Armondo Montelongo do it on television...it is not that easy and if you cannot afford to carry that extra mortgage for at least six months you are insane to buy a house as an investment.

 

Obama is such a racist. Always promoting home ownership only for the rich and the white.

Forget about the American dream.