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No down payment? No problemUser Forum Topic
Submitted by Ex-SD on May 12, 2008 - 1:27pm
You probably thought nothing-down mortgage loans disappeared in the wake of the American subprime lending crisis, which has ensarled much of the world in a credit crunch. They didn't. Even more surprising, many Americans can still buy homes with nothing down thanks in large part to the federal government and a legal loophole that lets builders and bankers ensure a steady stream of asset-challenged borrowers for taxpayer-insured loans. Story here:
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Yeah, they have been doing this for a while now. We have talked about it before. The ONLY good news is that in order to get the loan you have to meet the income doc requirements and have a good fico. AND you can only have one of these loans at a time. So basically you can't get a loan you can't pay for.
I knew about most of what they talked about in that article but I didn't know that they were still allowing the "not for profit organizations" to gift the 3% down payment.
From the article:
"But for those who lack the wherewithal to put even a little skin in the game, there's a workaround: a not-for-profit organization can give prospective buyers the teensy downpayment. The spigot is wide open. Of the 180,881 loans that the FHA insured in the first half of fiscal 2008, 36.7 percent, or 66,337, were seller-funded. With home builders and sellers desperate to make sales in a slowing real estate market, this percentage is likely to grow."
This is simply going to cause a repeat of the mess that the housing industry is presently in. It has been demonstrated for many, many years by banks and companies who fund loans for big-ticket items to people who do not put a down payment on the product will quickly see a very large number of the borrowers default within the first one to two years. Anyone who has ever been involved in retail management of big-ticket, retail products learns this when they make the mistake of giving credit to people who can't afford a down payment.
Nobody expects to buy with a substantial down-payment anymore. The market is simply adjusting to that new reality. Everybody will pay a little bit more.
It's like buying electronics at Best Buy. The person who buys at 0% financing, no payment for 6 months, is getting a subsidy from the guy who pays cash.
It's like buying electronics at Best Buy. The person who buys at 0% financing, no payment for 6 months, is getting a subsidy from the guy who pays cash.
I thought they are subsidized by people who can't pay in full after 6 months :P
Maybe I can get my 2 year old qualified on one of these homes. She has a pulse, and I can hire her for my company so that she has a "job".
selfportrait
----- Sour grapes for everyone!
FLU, you may need to wait two or three years. Your daughter will most likey need to sign her own name. Other than that, she is set.
FLU, you may need to wait two or three years. Your daughter will most likey need to sign her own name. Other than that, she is set.
That's what the etch-e-sketch is for. You'd be amazed at how much kids learn from them.
Any accountants know if I use an etch-e-sketch for this purpose, can I write it off as an investment or educational expense?
selfportrait
----- Sour grapes for everyone!
I subsscribe to magazines in my cat's name. I sometimes get credit card offers for him and other junk mail.
I wonder if he'd be able to buy a house?
:-)