[quote=Scarlett]It would have been nice to see more pertinent answers to the OP, not biting his head off.
I don’t think people should be bitter and overanalyze why and what is the OP buying. His family is probably young and if one of them is lawyer or doctor recently minted, they wouldn’t have had time to save money for 20% of those ridiculously inflated prices. They probably are to be commended they don’t have other debts. If he is a doctor or lawyer ( I am using these here as examples only) and his income is almost guaranteed to increase substantially in the near future, why not buy now?. I would too in his shoes. He has 20% of the 2001-2002 price, but only 10% of the 2005-current price. whose fault is the prices are overinflated? Anyhow, that’s why you pay PMI if you have less than 20% down. It’s extra insurance. If it makes sense for him regarding debt-to-income ratio and comparing with rent I say go for it.
And, no, he is not only paying the dowpayment 60K for housing, he will pay every month 3500-4000 at least in PITI unless he defaults immediately. And if his income will increase he will be able to afford it easily.[/quote]
And there you can see laid out very clearly why we have arrived at the situation we are in.
Why should a nice, decent person have to wait to get something? If they say they are about to earn a lot of money, why make them wait a few years while they prove it?
It’s OK to allow low downpayments (of less than 20% or so, let’s say) because private mortgage insurers can cover the possible losses. Yes, private mortgage insurers can collect $20 billion over 10-15 years of a home price cycle, and then cover the trillion dollars of losses in the inevitable downturn. We all know that taxpayers have paid, and will be paying the difference. You just can’t insure against losses this big without insisting that the home owners come up with lots of their own money.
“Whose fault is it that prices are inflated?” A lot of people are at fault. Lenders are at fault for allowing (true buyer-funded) downpayments of less than 20%. Buyers are at fault for looking only at the home price a lender will qualify them for, and for buying with less than 20% down. Just because it’s not this prospective first-time home buyer’s fault for creating a market with inflated prices doesn’t mean that they should make all the same mistakes that created that market. Then they would share full responsibility for making home prices too high.
