Lending Standards

[Dougie944]

Very loose lending standards have now come around full circle and are taking our Country to its knees. With more pain to come.

I am not in the credit market, so I have no basis to know where the standards are at the moment.

I don’t want to look back and see that lending in the year 2008/2009 are coming back to haunt us. Has lending tightened up to historical levels (down payment, credit scores, verification of income, legit appraisals, etc)?

[UCGal]

I’m old enough to remember what getting a mortgage used to be like. You had to put 20% down. You had to have good credit. You had to have enough income to make the payments. Adjustable rates either didn’t exist or were extremely rare. That was 1992.

If you were doing an off-books family loan for your 20%, you had to do it in advance – banks looked suspiciously if you didn’t have your 20% down payment sitting in the bank, ready to go, months ahead of time.

I had ok credit scores (mid-low 700s) but still had to write a letter explaining why I’d had a few late payments on credit cards in college. I sweated over that letter.

Plenty of people bought houses. Maybe not in their 20’s… you had to save up. But people did it.

I don’t think we’ll go back to those standards. We should. But we won’t.

[UCGal]

I’m old enough to remember what getting a mortgage used to be like. You had to put 20% down. You had to have good credit. You had to have enough income to make the payments. Adjustable rates either didn’t exist or were extremely rare. That was 1992.

If you were doing an off-books family loan for your 20%, you had to do it in advance – banks looked suspiciously if you didn’t have your 20% down payment sitting in the bank, ready to go, months ahead of time.

I had ok credit scores (mid-low 700s) but still had to write a letter explaining why I’d had a few late payments on credit cards in college. I sweated over that letter.

Plenty of people bought houses. Maybe not in their 20’s… you had to save up. But people did it.

I don’t think we’ll go back to those standards. We should. But we won’t.

[UCGal]

I’m old enough to remember what getting a mortgage used to be like. You had to put 20% down. You had to have good credit. You had to have enough income to make the payments. Adjustable rates either didn’t exist or were extremely rare. That was 1992.

If you were doing an off-books family loan for your 20%, you had to do it in advance – banks looked suspiciously if you didn’t have your 20% down payment sitting in the bank, ready to go, months ahead of time.

I had ok credit scores (mid-low 700s) but still had to write a letter explaining why I’d had a few late payments on credit cards in college. I sweated over that letter.

Plenty of people bought houses. Maybe not in their 20’s… you had to save up. But people did it.

I don’t think we’ll go back to those standards. We should. But we won’t.

[UCGal]

I’m old enough to remember what getting a mortgage used to be like. You had to put 20% down. You had to have good credit. You had to have enough income to make the payments. Adjustable rates either didn’t exist or were extremely rare. That was 1992.

If you were doing an off-books family loan for your 20%, you had to do it in advance – banks looked suspiciously if you didn’t have your 20% down payment sitting in the bank, ready to go, months ahead of time.

I had ok credit scores (mid-low 700s) but still had to write a letter explaining why I’d had a few late payments on credit cards in college. I sweated over that letter.

Plenty of people bought houses. Maybe not in their 20’s… you had to save up. But people did it.

I don’t think we’ll go back to those standards. We should. But we won’t.

[UCGal]

I’m old enough to remember what getting a mortgage used to be like. You had to put 20% down. You had to have good credit. You had to have enough income to make the payments. Adjustable rates either didn’t exist or were extremely rare. That was 1992.

If you were doing an off-books family loan for your 20%, you had to do it in advance – banks looked suspiciously if you didn’t have your 20% down payment sitting in the bank, ready to go, months ahead of time.

I had ok credit scores (mid-low 700s) but still had to write a letter explaining why I’d had a few late payments on credit cards in college. I sweated over that letter.

Plenty of people bought houses. Maybe not in their 20’s… you had to save up. But people did it.

I don’t think we’ll go back to those standards. We should. But we won’t.

[EconProf]

Another factor about the “good old days” when people had to have 20% down:
Accumulating that 20% meant a few years of saving–an alien concept for today’s consumers. Saving meant budgeting, watching your expenditures, having the satisfaction of seeing that nest egg grow, and forming habits over several years time that did not go away once one bought the house. That self-discipline and the ability to defer gratification is missing today and will have to be relearned.
In fact, perhaps a few years of truly gut-wrenching austerity imposed upon Americans by a deep, deep recession will have its beneficial effects.
As George Carlin liked to say “It’s just stuff”.

[EconProf]

Another factor about the “good old days” when people had to have 20% down:
Accumulating that 20% meant a few years of saving–an alien concept for today’s consumers. Saving meant budgeting, watching your expenditures, having the satisfaction of seeing that nest egg grow, and forming habits over several years time that did not go away once one bought the house. That self-discipline and the ability to defer gratification is missing today and will have to be relearned.
In fact, perhaps a few years of truly gut-wrenching austerity imposed upon Americans by a deep, deep recession will have its beneficial effects.
As George Carlin liked to say “It’s just stuff”.

[EconProf]

Another factor about the “good old days” when people had to have 20% down:
Accumulating that 20% meant a few years of saving–an alien concept for today’s consumers. Saving meant budgeting, watching your expenditures, having the satisfaction of seeing that nest egg grow, and forming habits over several years time that did not go away once one bought the house. That self-discipline and the ability to defer gratification is missing today and will have to be relearned.
In fact, perhaps a few years of truly gut-wrenching austerity imposed upon Americans by a deep, deep recession will have its beneficial effects.
As George Carlin liked to say “It’s just stuff”.

[EconProf]

Another factor about the “good old days” when people had to have 20% down:
Accumulating that 20% meant a few years of saving–an alien concept for today’s consumers. Saving meant budgeting, watching your expenditures, having the satisfaction of seeing that nest egg grow, and forming habits over several years time that did not go away once one bought the house. That self-discipline and the ability to defer gratification is missing today and will have to be relearned.
In fact, perhaps a few years of truly gut-wrenching austerity imposed upon Americans by a deep, deep recession will have its beneficial effects.
As George Carlin liked to say “It’s just stuff”.

[EconProf]

Another factor about the “good old days” when people had to have 20% down:
Accumulating that 20% meant a few years of saving–an alien concept for today’s consumers. Saving meant budgeting, watching your expenditures, having the satisfaction of seeing that nest egg grow, and forming habits over several years time that did not go away once one bought the house. That self-discipline and the ability to defer gratification is missing today and will have to be relearned.
In fact, perhaps a few years of truly gut-wrenching austerity imposed upon Americans by a deep, deep recession will have its beneficial effects.
As George Carlin liked to say “It’s just stuff”.

[Scarlett]

I completely agree with budgeting and watching your expenditures, but for that to be doable , the house prices have to come down enough so that saving 20% of the price would not take more than a few years…
Exmaple: if you have a family with 2 young kids, and an income of 150K (both parents with PhD,working) once you put some money away for retirement and college, you pay your rent and transportation and cars, and pay the daycare/school stuff and food and clothes there isn’t that much left to save for a downpayment…Maybe, at best, if they are really really good, 1000/month and take no vacations and no other unusual expenses like furniture or braces etc…. If they want a decent 4 bdr home with yard at ~600K, it will take them more than 10 years to save for 20% downpayment…

[Scarlett]

I completely agree with budgeting and watching your expenditures, but for that to be doable , the house prices have to come down enough so that saving 20% of the price would not take more than a few years…
Exmaple: if you have a family with 2 young kids, and an income of 150K (both parents with PhD,working) once you put some money away for retirement and college, you pay your rent and transportation and cars, and pay the daycare/school stuff and food and clothes there isn’t that much left to save for a downpayment…Maybe, at best, if they are really really good, 1000/month and take no vacations and no other unusual expenses like furniture or braces etc…. If they want a decent 4 bdr home with yard at ~600K, it will take them more than 10 years to save for 20% downpayment…

[Scarlett]

I completely agree with budgeting and watching your expenditures, but for that to be doable , the house prices have to come down enough so that saving 20% of the price would not take more than a few years…
Exmaple: if you have a family with 2 young kids, and an income of 150K (both parents with PhD,working) once you put some money away for retirement and college, you pay your rent and transportation and cars, and pay the daycare/school stuff and food and clothes there isn’t that much left to save for a downpayment…Maybe, at best, if they are really really good, 1000/month and take no vacations and no other unusual expenses like furniture or braces etc…. If they want a decent 4 bdr home with yard at ~600K, it will take them more than 10 years to save for 20% downpayment…

[Scarlett]

I completely agree with budgeting and watching your expenditures, but for that to be doable , the house prices have to come down enough so that saving 20% of the price would not take more than a few years…
Exmaple: if you have a family with 2 young kids, and an income of 150K (both parents with PhD,working) once you put some money away for retirement and college, you pay your rent and transportation and cars, and pay the daycare/school stuff and food and clothes there isn’t that much left to save for a downpayment…Maybe, at best, if they are really really good, 1000/month and take no vacations and no other unusual expenses like furniture or braces etc…. If they want a decent 4 bdr home with yard at ~600K, it will take them more than 10 years to save for 20% downpayment…

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