0 down payment mortgages

[resolution]

This weekend I received an advertisement from a new home builder that is advertising 0 down payment loans courtesy of the USDA rural home loan program. It is a program for low income buyers. However when i went to their site, their income limit for my area is 89k (the median household income in my area is 31K) so just about anyone in this area would qualify.

For some reason I had hoped that we were done with this kind of loan, but it seems like they are going full speed ahead. There were some articles in the paper this weekend saying that proposed regulations to require down payments were being protested as discriminating against minorities and low income populations. To me it looks like they are trying to keep business as usual and just set up for the next wave of foreclosures.

[qofcc]

Low down payments may have contributed to STRATEGIC defaults when values plummeted, but it was too high of debt-to-income ratios that contributed to foreclosures when the person lost the ability to pay.

[alabamagal]

This is what got us into trouble and now we are doing it again!

[april47]

You never know. Zero down payments were the norm for VA loans back in the 60's and 70's and I don't remember the massive foreclosures like now. The first house my husband and I bought in 1966 was a zero down VA loan.

[doxieluvr]

There are many requirements to usda loans. Did you actually do the calculato to see if you qualify? The big thing perk with usda loans is no mortgage insurance. Fha loans require you to pay pmi even if you put well over 20% down.

[Savoir Faire-Demogague in NJ]

You never know. Zero down payments were the norm for VA loans back in the 60's and 70's and I don't remember the massive foreclosures like now. The first house my husband and I bought in 1966 was a zero down VA loan.

Back in the 60s the housing market was not in a bubble and the govt was barely involved and pushing sub-primes, like they were in the late 90s and 2000s.
The mortgage and financial markets are very different today than 50 years ago.

[resolution]

I did the calculator just out of curiosity and it said eligible. We have no plans to buy, it just bothered me that they were still giving out 0 down loans after this whole lending crisis blew up. If a family can't save for a down payment, how are they going to be able to save for the expenses that come up over time, like a new roof or a new heater? The particular builder was advertising town homes, and I also don't see how any development that is a town home can be considered rural and fall under what started out as an agricultural program.

[Angel!]

Jun 14, 2011 8:23:27 GMT -5 qofcc said:

Low down payments may have contributed to STRATEGIC defaults when values plummeted, but it was too high of debt-to-income ratios that contributed to foreclosures when the person lost the ability to pay.

Exactly! 0 down payments are not nearly the problem that high debt-to-income ratios were as well as ARM loans.

You can buy a home with a 0 down payment & have no problems. You can overreach using an ARM to buy a home after putting 20% down & still lose your house.

[qofcc]

If a family can't save for a down payment, how are they going to be able to save for the expenses that come up over time, like a new roof or a new heater?

They don't necessarily need to save up, they just need to be able to afford the payments when they finance those things. If your debt-to-income ratio is low, you can afford payments on those things as they come up.

The particular builder was advertising town homes, and I also don't see how any development that is a town home can be considered rural and fall under what started out as an agricultural program.

Some of these programs are based on the county, not on the actual physical location.

[Wisconsin Beth]

Jun 14, 2011 9:48:42 GMT -5 resolution said:

I did the calculator just out of curiosity and it said eligible. We have no plans to buy, it just bothered me that they were still giving out 0 down loans after this whole lending crisis blew up. If a family can't save for a down payment, how are they going to be able to save for the expenses that come up over time, like a new roof or a new heater? The particular builder was advertising town homes, and I also don't see how any development that is a town home can be considered rural and fall under what started out as an agricultural program.

Our vacation/investment land is mortgaged as some kind of farm thing though the local cu for that area. It's a 15 year fixed rate though. Our brick and mortar bank told us if we could get a fixed rate from somewhere else to go for it because they were looking at 10%+ interest rates.

[Deleted]

I would love if they came back with 0% down payments as long as you agreed to allow the mortgage company to go after you if you defaulted. Like make a special recourse law specifically for these mortgages even in non-recourse states.

[doxieluvr]

In my area, the only homes that qualify for the usda loan are the ones zoned agriculture. My townhome would not qualify. Its weird that sone townhomes in other areas qualify.

[IPAfan]

Whenever I do buy a house I'm going to try to put the lowest down payment possible. I'd be happy to put 3-5% down, but 0% would be even better. We could scrape together a 20% DP today, but we'd have to withdraw from retirement accounts and I'm not willing to do that now.

[KaraBoo]

When I first purchased my house 9 years ago, I qualified for a single parent, first time home buyer program that allowed me to only put $500 earnest money down.

Everything else was wrapped up into the mortgage loan. 9 years later, we've refinanced twice now - first time to a 15 year note but with 7.15 interest, the second time to a 10 year note but with only a 4.25 interest. Our payments stayed the same both times.

We pay a little extra every month and I expect our mortgage to be paid off in 8-9 years.

[Tiny]

Zero down loans and ARMS weren't the ONLY cause of the housing bubble. You (the generic you) need to think beyond general assumptions - few things in life can be pinpointed to a single cause. Generally there's a collection of things that come together to cause something.

If the houses being sold with 0 down payments generate monthly payments of 30% or less of the buyer's gross income it should be doable. I suspect the 0 down mortgages that the particular bank actually writes will want the mortgage payment to be LESS than 30% of the buyers gross income.

The whole down payment thing won't stop someone from getting in over their heads on a mortgage... Just because you have 70K in cash (as a downpayment) it doesn't automatically mean you'll have no problem affording a 280K loan on a 350K house.

FWIW: a year ago, I 100% financed an investment property - The mortgage lender got 20% down - but the downpayment was money I borrowed using the HELOC on my house. The DP wasn't alot of money and I didn't want to liquidate any of my investments. I've got 24 (maybe less if I get motivated) payments on the HELOC to pay off the money I borrowed for the DP.

[thyme4change]

proposed regulations to require down payments were being protested as discriminating against minorities and low income populations.

I hate all those homophobic, self righteous, christian freakasoids that make up the republican base - but it is statements like this that make me want to punch liberals in the face. Home OWNERSHIP isn't a right to be protected for everyone. It should be reserved for people who can AFFORD it. I don't care what color they are.

[Deleted]

I miss 10/10/80 loans ( or 5/15/80 ). At the current low HELOC rates, I would have loved to done 10/10/80 on our new house instead of 20/80.

[thyme4change]

At the current low HELOC rates, I would have loved to done 10/10/80 on our new house instead of 20/80.

You know...it isn't too late. Just go to the bank and borrow 10% on a HELOC.

Oh - unless you have no equity. Sorry about that.

[Deleted]

Jun 14, 2011 11:47:35 GMT -5 thyme4change said:

At the current low HELOC rates, I would have loved to done 10/10/80 on our new house instead of 20/80.

You know...it isn't too late. Just go to the bank and borrow 10% on a HELOC.

Oh - unless you have no equity. Sorry about that.

New house = we are closing on the 29th. We are putting 20% down. I'd rather be putting 5 or 10% down and putting the rest to work elsewhere.

[Deleted]

Down payments do NOT dictate whether or not a loan will be a problem

Debt to income...and adjusting ARMS were the main culprits behind all the problems

Liar loans....cashiers who made $ 10hr getting 350k loans (yeah that was really going to work)

MY home loan is a VA loan.....total out of pocket was $ 2133 at closing

I also now have 2 rentals where i put 10% down on both

Keeping a cash buffer to cover those so called problems is much better than having to put it all into a house at the start of the loan (which is what a lot of young couples are being forced to do)

[thyme4change]

New house = we are closing on the 29th. We are putting 20% down. I'd rather be putting 5 or 10% down and putting the rest to work elsewhere.

Wait a few months and go borrow the 10% back.

[Sum Dum Gai]

We put 0% down on our house last year and we're doing fine. It's a normal 30 year fixed VA loan at 5%. I'd like to say we had 20% to put down but chose to put it in the market instead, but I'd be lying. Kind of.

Knowing that I was elegible for a zero down VA loan meant that we never even bothered to save up for a down payment fund. We put everything towards retirement from the get go. If I didn't have the VA eligibility, I would have been putting a lot less into retirement accounts and been sticking money in a savings account at the bank instead. The end result would be living in the same house we do now, but with almost no retirement balance, a payment that's maybe a couple hundred less a month, and it would have taken a down payment of $56k to accomplish. Frankly, I don't see why anyone puts money down unless they absolutely have to.

[Tiny]

Frankly, I don't see why anyone puts money down unless they absolutely have to.

I can see a big down payment if it gets you more house... in other words if you can qualify for 200K mortgage and have no money down - you can concievably buy a 200K house. If you have 50K to put down and qualify for a 200K mortgage you can look for houses 250K and under...

ADDED: but being a good YM'er you have to consider the value of the 50K invested in something other than your home...

[Sum Dum Gai]

I can see a big down payment if it gets you more house... in other words if you can qualify for 200K mortgage and have no money down - you can concievably buy a 200K house. If you have 50K to put down and qualify for a 200K mortgage you can look for houses 250K and under...

That makes sense I guess, especially if you could only qualify for say $100k without a down payment and the only houses in that range in your area were gang war zones or something.

[Deleted]

Jun 14, 2011 16:30:51 GMT -5 Sum Dum Gai said:

Frankly, I don't see why anyone puts money down unless they absolutely have to.

Besides not needing PMI, putting 20% down kept us in a conforming <$417,000 loan, which saved a little on the interest rate. Not enough to concern me since the spread was only .25% between conforming and jumbo so i would have still done a 10/10/80 if it was available.

[Deleted]

Jun 14, 2011 16:30:51 GMT -5 Sum Dum Gai said:

We put 0% down on our house last year and we're doing fine. It's a normal 30 year fixed VA loan at 5%. I'd like to say we had 20% to put down but chose to put it in the market instead, but I'd be lying. Kind of.

Knowing that I was elegible for a zero down VA loan meant that we never even bothered to save up for a down payment fund. We put everything towards retirement from the get go. If I didn't have the VA eligibility, I would have been putting a lot less into retirement accounts and been sticking money in a savings account at the bank instead. The end result would be living in the same house we do now, but with almost no retirement balance, a payment that's maybe a couple hundred less a month, and it would have taken a down payment of $56k to accomplish. Frankly, I don't see why anyone puts money down unless they absolutely have to.

I wish I did not have to put down anything.

[Sum Dum Gai]

I always forget about PMI. VA loans don't have it because the VA guarantees 25% of the loan.

[Deleted]

Jun 14, 2011 11:15:36 GMT -5 Tiny said:

If the houses being sold with 0 down payments generate monthly payments of 30% or less of the buyer's gross income it should be doable.

That's the key. In some areas such as towns within commuting distance of NYC, a "starter" house in a neighborhood where you'd consider raising a family can be $500,000. That's one heck of a down payment. There are likely some two-income couples who have the income to make that work but haven't been able to accumulate a $100K down payment.

My first house in that area was a two-family bought with a friend; we could scrape up only 5% to put down but handled the payments easily. And, to answer one question already posed, we also put aside a certain amount every month for a repair/maintenance fund and we kept the place very nicely. My partner was a fix-it guy and he was happy as a clam. Never a late or missed payment.

[Malarky]

Jun 14, 2011 8:54:59 GMT -5 april47 said:

You never know. Zero down payments were the norm for VA loans back in the 60's and 70's and I don't remember the massive foreclosures like now. The first house my husband and I bought in 1966 was a zero down VA loan.

Back then people would do almost anything to avoid the shame of bankruptcy. It was a different world.

Edited for spelling.

[schildi]

Jun 14, 2011 16:11:09 GMT -5 @gdgyva said:

Down payments do NOT dictate whether or not a loan will be a problem

Debt to income...and adjusting ARMS were the main culprits behind all the problems

Liar loans....cashiers who made $ 10hr getting 350k loans (yeah that was really going to work)

MY home loan is a VA loan.....total out of pocket was $ 2133 at closing

I also now have 2 rentals where i put 10% down on both

Keeping a cash buffer to cover those so called problems is much better than having to put it all into a house at the start of the loan (which is what a lot of young couples are being forced to do)

It's all of it combined. Low / no down payment is certainly a big problem as well as it will make the decision to walk so much easier.
I think 20-25% down as a minimum is reasonable.