Re: Rising Food Costs

In article <479B9142.D0CD82B@xxxxxxxx>, "Pete C." <aux3.DOH.4@xxxxxxxx>
wrote:

Nancy Young wrote:

It wasn't so long ago you were expected to put money down if you
bought a house. No money down! was a joke real estate scam.
Now you see all these people getting 80/20 loans, they don't even
have to pay the closing costs. Gee, can't see how that could go
wrong. Arggh.

Yes, and no. Certainly there has been plenty of mortgage abuse from all
directions. I do strongly disagree with the size of a down payment
bearing any relation to the risk of the mortgage. That may well have
been the case in years past, when renters were actually able to put food
on the table and put aside savings for a down payment on a house (and
with a single income at that).

Today the world is a very different place and many renters are paying
nearly the same amount for rent as a mortgage payment, if they are a
family, dual incomes are required just to pay the rent and put food on
the table, and saving $20k for a mortgage down payment simply isn't
possible.

Simply looking at those renters history of paying the rent each month
will show pretty clearly if they can make the mortgage payment each
month. A requirement of a large down payment only serves to discriminate
against a large segment of the population that is hard working and could
readily pay a reasonable mortgage on a reasonable house.

I don't agree. As Nancy said, "Gee, what could go wrong with that?".
Everything. A renter's history of paying their rent should be a good
indicator of whether they can pay the mortgage next month. A
conservative lender looks past that. If somebody buys with nothing
down, and the housing market drops to 80%, then the buyer has a 20%
negative equity. Somebody who borrows 80% and puts down their life
savings is in a different situation. If the job market fails also, or
health fails so the buyer just can't work at a job sufficient to pay the
bills, including the mortgage, then the first buyer can walk away and
lose nothing, leaving the mortgage holder with the property which is
probably going to give them a net loss after the foreclosure auction.
The second buyer has their life savings tied up. They will be motivated
to keep the property, even if they have to borrow from relatives
temporarily.

--
Dan Abel
Petaluma, California USA
dabel@xxxxxxxxx
.

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