It seems like the discussion of whether 20% down payment should be mandatory comes up a lot.
I used to be adamantly opposed to requiring 20% down for borrowers with good credit. Mainly because it would take a lot of years to save up 20% of the median home price in SD. That basically means you have to come up with at least $100k, which seems impossible for a first time home-buyer to save up. Instead of young couples looking to buy their first starter home, we would have middle-aged folks entering the market for the first time b/c that’s how long it would take to save that kind of $$$.
After seeing the bank I work for get hammered by 80/20 loan products, I am starting to come around. The banks are just taking on too much risk with no committment from the borrower. It is just too easy for people to walk away. Even piggington folks like 23109VC seriously consider walking away (see his post: “Harveston down the drain”).
It really frustrates me that I have a professional degree w/ decent pay & still can’t come close to buying a house in my own hometown. In the late 70’s, my father-in-law bought a brand new home in a shiney new Mira Mesa for $30k. He was a 2nd year enlisted man in the coast guard, and could buy a home here! The price was 3x his annual salary.
My Dad bought our Poway home in ’86 for $85k & he was a machinist for Ryan Aero making about $40k w/OT at the time. The house was barely more than 2x his annual salary.
I made over $80k when I lived in SD last year, and the middle of the road home in my hood was about $750k. Almost 10x my yearly wage! That just pisses me off.
I like to think tightening lending standards (like 20% down), although making things really ugly in the short-term, would bring the affordability of San Diego back to reality some day.
