The worlds best loan

[Ex-SD]

I think that the $475k house that he bought will be worth no more than $300k in 10 years so when the interest only portion is up, he will start paying for P&I for 30 years for an overpriced property. The bottom for housing prices in SoCal won’t hit until at least the end of 2011 but most likely 2012 or later. When the bottom hits, prices will not go up for years because the average incomes for buyers in SD don’t equal what it takes to get a loan. Prices will only be able to rise according to income rising along with inventory & demand. After this fiasco, banks will not be handing out loans like candy to trick or treaters and buyers will not be so eager to buy a home that they can’t use as a get rich quick scheme or an ATM.
If he’s happy with the loan, more power to him but it’s not something I would advise any of my children to do.

[joestool]

Here are the stipulations. You can’t make over 90k per year. You must attend two 3 hour counseling classes. It is full doc.
There is also a program called the cadat, where the state of california pays three points to lower your rate even further. This is in the form of a silent second that needs to be paid back when you sell it if ever.

What gets me is by my making slightly over 90k I have even less buying power in the housing market than you do.
I’m forced to pay taxes that go to subsidize your buying a house you can’t really afford. Thus creating artificial demand driving up the price so now I can’t afford it either. Then, when you eventually default because life changes require you forclose or sell the house in a short sale, I get to pay even more in taxes and inflation to bail you out again.

Enjoy the house.

[joestool]

Here are the stipulations. You can’t make over 90k per year. You must attend two 3 hour counseling classes. It is full doc.
There is also a program called the cadat, where the state of california pays three points to lower your rate even further. This is in the form of a silent second that needs to be paid back when you sell it if ever.

What gets me is by my making slightly over 90k I have even less buying power in the housing market than you do.
I’m forced to pay taxes that go to subsidize your buying a house you can’t really afford. Thus creating artificial demand driving up the price so now I can’t afford it either. Then, when you eventually default because life changes require you forclose or sell the house in a short sale, I get to pay even more in taxes and inflation to bail you out again.

Enjoy the house.

[joestool]

Here are the stipulations. You can’t make over 90k per year. You must attend two 3 hour counseling classes. It is full doc.
There is also a program called the cadat, where the state of california pays three points to lower your rate even further. This is in the form of a silent second that needs to be paid back when you sell it if ever.

What gets me is by my making slightly over 90k I have even less buying power in the housing market than you do.
I’m forced to pay taxes that go to subsidize your buying a house you can’t really afford. Thus creating artificial demand driving up the price so now I can’t afford it either. Then, when you eventually default because life changes require you forclose or sell the house in a short sale, I get to pay even more in taxes and inflation to bail you out again.

Enjoy the house.

[(former)FormerSanDiegan]

Historically, in high inflation environments the price of hard assets goes up. Real estate is a hard asset. So is gold.

If the current dollar decline results in increased inflation, I would expect that the remaining 30-40% or so price decline in San Diego could consist of half due to inflaiton and half due to nominal price declines.

What leads one to conclude that a declining dollar and rampant inflation would put downward pressure on real estate prices. I do not understand the logic of those who hold this view. Is there some sort of mass cognitive dissonance going on ?

[(former)FormerSanDiegan]

Historically, in high inflation environments the price of hard assets goes up. Real estate is a hard asset. So is gold.

If the current dollar decline results in increased inflation, I would expect that the remaining 30-40% or so price decline in San Diego could consist of half due to inflaiton and half due to nominal price declines.

What leads one to conclude that a declining dollar and rampant inflation would put downward pressure on real estate prices. I do not understand the logic of those who hold this view. Is there some sort of mass cognitive dissonance going on ?

[(former)FormerSanDiegan]

Historically, in high inflation environments the price of hard assets goes up. Real estate is a hard asset. So is gold.

If the current dollar decline results in increased inflation, I would expect that the remaining 30-40% or so price decline in San Diego could consist of half due to inflaiton and half due to nominal price declines.

What leads one to conclude that a declining dollar and rampant inflation would put downward pressure on real estate prices. I do not understand the logic of those who hold this view. Is there some sort of mass cognitive dissonance going on ?

[Raybyrnes]

bsrsharma

You arr right on the money. That is a great loan. IN 10 years you coul likely see a combination of higher rates and higher home prices. Having locked in at 6% the paper becomes cheap. Additionally accounting for inflation his 3000K payment in 40 years is equivalent to a $1500 payment or less in todays terms.

There is also nothing that stops him from prepaying the loan back or refinancing if we got into soem wierd situation where rates went to some ridiculous 4% range. The big thing here is making sure you have the cash to continue to make the payment.

Nice thing with this home loan is that in the enevt of job loss I believe there is deferrment and forbearanc ein the form of PMI that will cover the mortgage so even his payment is insured. It is a good loan.

[Raybyrnes]

bsrsharma

You arr right on the money. That is a great loan. IN 10 years you coul likely see a combination of higher rates and higher home prices. Having locked in at 6% the paper becomes cheap. Additionally accounting for inflation his 3000K payment in 40 years is equivalent to a $1500 payment or less in todays terms.

There is also nothing that stops him from prepaying the loan back or refinancing if we got into soem wierd situation where rates went to some ridiculous 4% range. The big thing here is making sure you have the cash to continue to make the payment.

Nice thing with this home loan is that in the enevt of job loss I believe there is deferrment and forbearanc ein the form of PMI that will cover the mortgage so even his payment is insured. It is a good loan.

[Raybyrnes]

bsrsharma

You arr right on the money. That is a great loan. IN 10 years you coul likely see a combination of higher rates and higher home prices. Having locked in at 6% the paper becomes cheap. Additionally accounting for inflation his 3000K payment in 40 years is equivalent to a $1500 payment or less in todays terms.

There is also nothing that stops him from prepaying the loan back or refinancing if we got into soem wierd situation where rates went to some ridiculous 4% range. The big thing here is making sure you have the cash to continue to make the payment.

Nice thing with this home loan is that in the enevt of job loss I believe there is deferrment and forbearanc ein the form of PMI that will cover the mortgage so even his payment is insured. It is a good loan.

[kewp]

bsrsharma,

Wages are still lagging (real) inflation by a significant amount. And RE inflation by an even more significant amount.

Compounding that is the very real issue that while folks can live without a mortgage, they can’t live without paying for food and energy. The former is going to suffer due to inflation of the latter.

[kewp]

bsrsharma,

Wages are still lagging (real) inflation by a significant amount. And RE inflation by an even more significant amount.

Compounding that is the very real issue that while folks can live without a mortgage, they can’t live without paying for food and energy. The former is going to suffer due to inflation of the latter.

[kewp]

bsrsharma,

Wages are still lagging (real) inflation by a significant amount. And RE inflation by an even more significant amount.

Compounding that is the very real issue that while folks can live without a mortgage, they can’t live without paying for food and energy. The former is going to suffer due to inflation of the latter.

[patientlywaiting]

I agree this is a good loan compared to what is available in todays market. Just like some affordable-income programs are good in today’s market.

But considering how much house prices will drop, those financing schemes don’t mean much. Buy a house at a price you can afford not because of financing schemes.

Ex-SD is right; prices will continue to drop for a long time. You’re much better off buying at the low.

[patientlywaiting]

I agree this is a good loan compared to what is available in todays market. Just like some affordable-income programs are good in today’s market.

But considering how much house prices will drop, those financing schemes don’t mean much. Buy a house at a price you can afford not because of financing schemes.

Ex-SD is right; prices will continue to drop for a long time. You’re much better off buying at the low.

[Author]

Posts