Can we please get rid of the 20% deposit for a new home?

[just me]

The housing industry stinks, and the public is suffering for the lax credit back when. Remove the 20% deposit requirement for the people to get rolling again a bit, please. There are many qualified buyers that just cannot come up with that rediculous amount of deposit.

 

[Billy]

If you cant even save up 20 grand, how can you be expected to have any long term stability for your home?

 

[CindyLou]

wow Billy has the cost of a home fallen that far?

I haven't checked in so long that's depressing

I just checked..yeah the average price is $145,000 but that is just in the midwest.

NE the average home is $238,000

 

[CindyLou]

The housing industry stinks, and the public is suffering for the lax credit back when. Remove the 20% deposit requirement for the people to get rolling again a bit, please. There are many qualified buyers that just cannot come up with that rediculous amount of deposit.

owning a home isn't really all it is cracked up to be anymore

you can't just put your house up for sale and walk away like you used to

only reason I'm still in mine is because we still have a mortgage interest tax deduction

if that little perk wasn't there I don't see why anyone would want to own a home anymore..renting seems like the better option

huge pain and a lot of work

I don't know why I'm writing like this today

 

[Cornerstone]

Wasn't giving mortgages to people who couldn't definitely keep up with the payments a big part of what caused the collapse? Sub prime, right?

 

[Nixie]

I'm sure the 20% down is to make sure that when the homeowner actually borrows (since most people have to) they have real equity.

I think sub-prime loans didn't help but the biggest kicker was individuals (and greedy banks willing to con them into it) borrowing money against an asset that they really had very little ownership of (equity). That was also compounded by the inflated housing market which was perpetuated by the easy access to loans (and sub-prime loans).

See, if you have to pay 20% down, you are less likely to purchase an over-inflated property. As houses sit and sit, the asking price drops until the buyer is enticed to purchase it and the market equalizes that way. When money was flowing fast, people were encouraged to purchase homes with little money down at over-inflated prices. When the loans became too much to bear and the owner defaulted, they owned houses that didn't have the value they thought they had.

 

[the]

The housing industry stinks, and the public is suffering for the lax credit back when. Remove the 20% deposit requirement for the people to get rolling again a bit, please. There are many qualified buyers that just cannot come up with that rediculous amount of deposit.

Not having 20% can be considered having lax credit. Then we are back to square one of the problem you already mentioned.

 

[just me]

copied written by Senator Johnny Isakson from enewsletter:November 16, 2012

Federal Reserve Chair Ben Bernanke, in a speech to the Operation HOPE Global Financial Dignity Summit in Atlanta on Thursday, stated of the attempts to correct previously lax mortgage lending standards that it “seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.” I urge the administration to heed Chairman Bernanke’s warning . I have repeatedly called on the administration to revise its proposed rule that would prevent responsible homebuyers from obtaining Qualified Residential Mortgages (QRMs) by requiring a 20 percent down payment. By putting into effect the 20 percent down payment requirement for Qualified Residential Mortgages, the administration is exacerbating the housing recession and preventing recovery, just as Chairman Bernanke warned Thursday. If the administration is serious about improving the economy, it cannot impose overly restrictive rules like the one that is on the table now and expect economic recovery.
Last year, Senators Kay Hagan, D-N.C., Mary Landrieu, D-La., and I, led a bipartisan group of 39 Senators in writing a letter urging federal regulators to avoid restricting credit to middle class families working to own a home. Over 250 members of the U.S. House of Representatives joined together to write a subsequent letter opposing the rule. I will continue to press this issue as a vital part of our economy recovery. unquote

Seems like Bernanke even sees it.

 

[this is only temporary]

Hey Just me, 20% down payment is not a requirement on most mortgages, that rule may have been proposed, but it was never passed or implemented.

You can get mortgages today for as little as 3% down, I know people are doing this currently. If you are trying to get a mortgage and finding it hard to get approved, homepath.com is a website worth checking out; there are several programs like it.

Having more stringent requirements for mortgages was supposed to correct the extremely lax lending practices that helped cause the real estate crisis, and even though it is harder today than it used to be to get a mortgage, I'm certain 20% down is not a current requirement. Otherwise nobody at all would be buying homes, and they actually are, at least they are where I live.

 

[this is only temporary]

Wait, I just realized you may be talking about the rule where you have to pay mortgage insurance if you put down less than 20%? Okay, I think I see what you meant, sorry.

Plenty of homebuyers are getting loans where they put down significantly less than 20% down payment, but they pay mortgage insurance. Most people then proceed to make their payments, they build up equity and generally, they get rid of mortgage insurance in a few years. That's with private lenders, there are programs where the government basically insures your loan against default, so you don't have to pay mortgage insurance, I believe.

 

[just me]

The financial regulators who are preparing to implement this provision have interpreted the Isakson-Hagan-Landrieu QRM provision in a way that the senators did not intend. The regulators have proposed that homebuyers must come up with a 20 percent down payment in order to qualify for the exempted mortgages.
Lawmakers and various industry and consumer groups have called on regulators several times in the past two years to revise the proposed 20 percent down payment requirement, insisting that the regulators did not follow the Congress’ legislative intent and explicit recommendations to require a sensible down payment. copied

 

[this is only temporary]

I'm willing to bet that excerpt refers to mortgages that are exempt from the requirement of having mortgage insurance, rather than all mortgages, for everyone.

The way it currently works with most private lenders (i.e. not FHA or the like...) is, if you cannot put 20% down, you are required to pay mortgage insurance. Many people who cannot put 20% down either 1. go through one of the government-sponsored programs or else 2. they pay mortgage insurance on top of their montly payment, and when they reach 20% equity, that mortgage insurance gets removed.

In other words, a person can put $5,000 down on a $95,000 mortgage, to buy a home valued at $100,000. That person only has 5% equity in the house, (not the 20% that is considered really "safe" and which used to be standard back in the day, prior to the boom. Probably your grandparents or parents saved up and put 20% down, if they even had a mortgage at all, because decades ago that was standard operating procedure. That's what you call skin in the game -- they buyer assumes some of the risk, and is not motivated to default on the loan. Banks actually don't want houses, they prefer people to be able to easily pay back their loans.)

But with 5% (or less) down, the bank assumes more risk, and the buyer has less incentive to not default. So, to mitigate that risk, and to make homes more affordable, they have mortgage insurance. On top of your monthly payment you'd pay, say, $30 a month for mortgage insurance which protects the lender in the event you default on your loan, since basically, you are stretching to afford that loan. Once your loan balance is down to $80,000, the mortgage insurance goes away, cause you've assumed more of the risk.

And with FHA loans and the like, the government assumes more of the risk. And more people can afford homes, and demand goes up, and that drives prices up... and we all know what happens then, right?

so anyway, that's probably what the 20% thing is referring to, I bet.

 

[Flavus Aquila]

20% deposit just means that the banks think that housing in your area could possibly lose up to %15 of their value in the next 10 years.

Zero deposit loans only occur when the property market is booming in terms of price growth.