Bob, do you not like FHA loans because you read they were risky or that they look similar to the toxic loans of the past. I can probably help you over those fears. Buyers today are a little freightened and some people are buying properties that need considerable work, two good reasons for FHA’s newfound popularity. They have been making this exact loan for decades, it is not a toxic loan, it often has a fixed rate and payment. People with 30% down are opting for them out of fear, hoping to keep their cash reserves as large as possible and it’s not a bad strategy right now.
3X income is safe, like sdengineer pointed out, the percentage of income to housing debt is low, lower than any underwriting standard now, or in the past. people making 140k buying a 400k house is safe, skin in the game is less than optimal but that’s not the driving force in foreclosures it’s just a factor, adjustable rates, teaser loans, neg ams, stated loans, that is the culprit. Also people today that still make that kind of money are more likely to survive layoffs or pay cuts, there may be more in store but a lot of the fat has already been trimmed or the red flags are there, sure anyone can lose their income at any time in any economy, but at some point you can exhale.
The odds of a 24% income to housing debt ratio person with a solid track record of paying their bills actually has extremely good odds, if it were a game in a casino I’d bet it. Fha has been taking on some of those government assistance to fb programs and those aren’t a safe play for the taxpayer but sdengineer and the op are fine with my tax money. believe it or not, some people still pay their mortgage even if they go upside down, especially when their mortgage is the same as rent because when they look at the big picture, walking away and renting doesn’t look that good on paper for them, they will still have to pay the same amount, this is where houses near rent nuetral become low risk for foreclosure. the repos’s you are seeing happen now are mostly to people looking at entirely different numbers, if they walk away they can rent for half and their payment adjusted up to the point they couldn’t afford it, they aren’t looking at an equity hiccup, they will need a decade to get even and they have no ability to survive the year, they placed an unsustainable bet on appreciation and they were wrong. One the numbers work based on Zero appreciation ever, then it gets my stamp of approval.
BTW SDengineer, good numbers, good contingency plan, you get a gold star, well done!!
