Lending Standards

[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…

[Eugene]

Yes but in the “good old days” mortgage interest rates were 9% or higher. Average rates were above 9% continuously from 1978 to 1991. And saving money was easier. Banks paid 8-10% interest rates on savings and CDs. One dollar invested in Dow in 1980 was worth $3.50 in 1990.

Suppose that banks require max 30% housing to gross income. If the mortgage interest rate is 10%, that limits you to 3.1x income and you need to save 62% of your annual gross income for your 20% down payment.

If the mortgage interest rate is 5.5%, you need to save 90% of your annual gross income. You need to save 50 percent more money, even though savings interest rates are approaching zero, and stocks aren’t what they used to be, either. (One dollar invested into Dow in January of 2000 is now worth 91 cents)

[Eugene]

Yes but in the “good old days” mortgage interest rates were 9% or higher. Average rates were above 9% continuously from 1978 to 1991. And saving money was easier. Banks paid 8-10% interest rates on savings and CDs. One dollar invested in Dow in 1980 was worth $3.50 in 1990.

Suppose that banks require max 30% housing to gross income. If the mortgage interest rate is 10%, that limits you to 3.1x income and you need to save 62% of your annual gross income for your 20% down payment.

If the mortgage interest rate is 5.5%, you need to save 90% of your annual gross income. You need to save 50 percent more money, even though savings interest rates are approaching zero, and stocks aren’t what they used to be, either. (One dollar invested into Dow in January of 2000 is now worth 91 cents)

[Eugene]

Yes but in the “good old days” mortgage interest rates were 9% or higher. Average rates were above 9% continuously from 1978 to 1991. And saving money was easier. Banks paid 8-10% interest rates on savings and CDs. One dollar invested in Dow in 1980 was worth $3.50 in 1990.

Suppose that banks require max 30% housing to gross income. If the mortgage interest rate is 10%, that limits you to 3.1x income and you need to save 62% of your annual gross income for your 20% down payment.

If the mortgage interest rate is 5.5%, you need to save 90% of your annual gross income. You need to save 50 percent more money, even though savings interest rates are approaching zero, and stocks aren’t what they used to be, either. (One dollar invested into Dow in January of 2000 is now worth 91 cents)

[Eugene]

Yes but in the “good old days” mortgage interest rates were 9% or higher. Average rates were above 9% continuously from 1978 to 1991. And saving money was easier. Banks paid 8-10% interest rates on savings and CDs. One dollar invested in Dow in 1980 was worth $3.50 in 1990.

Suppose that banks require max 30% housing to gross income. If the mortgage interest rate is 10%, that limits you to 3.1x income and you need to save 62% of your annual gross income for your 20% down payment.

If the mortgage interest rate is 5.5%, you need to save 90% of your annual gross income. You need to save 50 percent more money, even though savings interest rates are approaching zero, and stocks aren’t what they used to be, either. (One dollar invested into Dow in January of 2000 is now worth 91 cents)

[Eugene]

Yes but in the “good old days” mortgage interest rates were 9% or higher. Average rates were above 9% continuously from 1978 to 1991. And saving money was easier. Banks paid 8-10% interest rates on savings and CDs. One dollar invested in Dow in 1980 was worth $3.50 in 1990.

Suppose that banks require max 30% housing to gross income. If the mortgage interest rate is 10%, that limits you to 3.1x income and you need to save 62% of your annual gross income for your 20% down payment.

If the mortgage interest rate is 5.5%, you need to save 90% of your annual gross income. You need to save 50 percent more money, even though savings interest rates are approaching zero, and stocks aren’t what they used to be, either. (One dollar invested into Dow in January of 2000 is now worth 91 cents)

[La Jolla Renter]

And, not too long ago…

an investment property cash flowed with 20% down.

The reason people rented is because they did not have 20% down.

How the hell did those basic financial fundamentals disappear in a few short years???

[La Jolla Renter]

And, not too long ago…

an investment property cash flowed with 20% down.

The reason people rented is because they did not have 20% down.

How the hell did those basic financial fundamentals disappear in a few short years???

[La Jolla Renter]

And, not too long ago…

an investment property cash flowed with 20% down.

The reason people rented is because they did not have 20% down.

How the hell did those basic financial fundamentals disappear in a few short years???

[La Jolla Renter]

And, not too long ago…

an investment property cash flowed with 20% down.

The reason people rented is because they did not have 20% down.

How the hell did those basic financial fundamentals disappear in a few short years???

[La Jolla Renter]

And, not too long ago…

an investment property cash flowed with 20% down.

The reason people rented is because they did not have 20% down.

How the hell did those basic financial fundamentals disappear in a few short years???

[Ren]

[quote=La Jolla Renter]And, not too long ago…

an investment property cash flowed with 20% down.
[/quote]

They do today, in Murrieta and Temecula. However, I believe there may also be some significant rent drops, so I’m not comfortable buying them just yet.
Next we’ll see it in inland San Diego.

I don’t think lending standards will tighten to the point they were in the past, but eliminating the liar loans is a great first step.

[Ren]

[quote=La Jolla Renter]And, not too long ago…

an investment property cash flowed with 20% down.
[/quote]

They do today, in Murrieta and Temecula. However, I believe there may also be some significant rent drops, so I’m not comfortable buying them just yet.
Next we’ll see it in inland San Diego.

I don’t think lending standards will tighten to the point they were in the past, but eliminating the liar loans is a great first step.

[Ren]

[quote=La Jolla Renter]And, not too long ago…

an investment property cash flowed with 20% down.
[/quote]

They do today, in Murrieta and Temecula. However, I believe there may also be some significant rent drops, so I’m not comfortable buying them just yet.
Next we’ll see it in inland San Diego.

I don’t think lending standards will tighten to the point they were in the past, but eliminating the liar loans is a great first step.

[Ren]

[quote=La Jolla Renter]And, not too long ago…

an investment property cash flowed with 20% down.
[/quote]

They do today, in Murrieta and Temecula. However, I believe there may also be some significant rent drops, so I’m not comfortable buying them just yet.
Next we’ll see it in inland San Diego.

I don’t think lending standards will tighten to the point they were in the past, but eliminating the liar loans is a great first step.

[Author]

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