[quote=ctr70]…FHA and VA have never had super high default rates. So it’s a myth that real estate “used to be” 20% down back in the day or it needs to be 20% down. FHA has never been 20% down and it’s been around since 1934…[/quote]
ctr70, I beg to differ with your opinion on past FHA and VA loan problems. Throughout the 80’s, both agencies took out a quarter page ad biweekly in the San Diego (morning) Union for their long lists of 1-4 unit properties they had recently taken back and were accepting sealed bids on in San Diego County. Not only was I authorized to show and write bids on VA-acquired properties, I purchased a couple of them myself. These agencies’ local property mgrs did not clean the properties, except to remove any perishable food and dead pets. Their main function was to issue lockbox keys to approved agents and accept and transfer sealed bids. There were no utilities on or running water in the properties while marketed. Many needed up to 12 trips to the dump first in order to be habitable.
Between 1982-1983, the FHA interest rate was approx 15.5%. Many FHA buyers in this era defaulted on <$80K loans. For the most part, the VA and FHA buyers of these properties who defaulted with 0-3.5% "skin" in the game had no business being homeowners in the first place, due to the way they DIDN'T maintain the properties. Many properties were also "stripped" of fixtures by the defaulting trustor, had clogged plumbing (due to squatters after becoming vacant), and had structural problems (often due to the defaulting trustor driving thru the back of the garage, or through the garage door).
If these agencies couldn't get their defaulted amount in a sealed bid, then they would accept less than the defaulted amount. Bidders with substantial downpayments always "won" over bidders without or who asked the agency (VA or FHA) to finance the property for them on their own "terms." The agencies would gladly offer low-down "terms" on properties which had structural damage.
FHA and VA closing fees are much too expensive, their rates are often not competitive. The demographic who typically uses these types of mortgages are least able to pay the up-front points due to seller reluctance (VA), exorbitant montly MMI (FHA) and/or higher interest rates. There is much cheaper money out there, IMO.
