Should 20 percent down payment become the norm again?
There was a time when putting 20 percent down on a house was the accepted norm for most buyers, AJC reporter Christopher Quinn writes.
A proposal to move back toward that standard in the wake of the housing meltdown, however, has produced an odd-bedfellow coalition of Democrats and Republicans, consumer advocates and bankers who fear that would leave homebuyers unable to afford loans and sellers unable to find buyers, Quinn reports.
What do you think of the proposal?
It would split home loans into two categories, Quinn writes. One would be loans to buyers who put 20 percent down, and lenders would face few regulatory hurdles bundling those loans to sell as investment securities. It was the volume of subprime loans in such securities that helped precipitate the financial crisis.
The other loan category would allow smaller down payments, but would require lenders to maintain at least 5 percent of the total value of their loans so they shoulder part of the risk, Quinn reports. The intent is to ensure lenders thoroughly vet borrowers. Some believe this would cause higher interest rates and shut lower-income buyers out of the market.
Do you support or oppose this proposal? Why?
- Henry Unger, The Biz Beat
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93 comments Add your comment
Chris
July 28th, 2011
12:04 pm
I support a free market. Let the lender and buyer decide what is appropriate for a down payment. It’s regulations that got us in this mess. Regulations won’t get us out.
Logic
July 28th, 2011
12:05 pm
Yes, this was the requirement when I purchased my first house in 1993. You get a better interest rate if you put 20% down.
Also, the average 30 year fixed mortgage rate is approximately 7% so our current rates are well below the average.
Logic
July 28th, 2011
12:06 pm
You have an outlet for Americans who will need to save for a down payment, it is called renting. I rented for 6 years till I purchased my first house.
MrLiberty
July 28th, 2011
12:07 pm
This shouldn’t be a proposal, a law, or anything else top-down. The Federal Reserve prints money out of thin air. It then sets the interest rate based on political whims. It has lowered the interest rate to basically zero which has been a major contributing factor to rising home prices and the bubble – well to be fair, it is the ONLY factor responsible for the bubble in housing. All of the creative, illegal, etc. schemes that we have seen come from the greedy were ONLY possible because of Federal Reserve policies and super cheap available money.
We need a free market in banking – PERIOD. No more of this fractional reserve criminal fraud behavior, no more of this lender of first resort crap. The money available for lending should be tied to the amount of money held in savings at the bank, and the bank should be allowed to require whatever down payment it feels is appropriate to secure the loan – PERIOD.
Central planning always fails. Bank central planning is failing before our eyes and taking the country down with it. TIME TO STOP THE GOVERNMENT MANIPULATION OF THE FREE MARKET. TIME TO END THE FDIC. TIME TO END THE GOVERNMENT BACKING OF LOANS.
ATF
July 28th, 2011
12:11 pm
The real problem with the proposal is not the 20% down, it is the 5% retention by the banks or lending institution. The problem was always that the lender had no skin in the game, had insufficient economic consequence if the loan went sour. Leave the bank 20% – or 40% – at risk, and the bank will be much more careful about who it lends to and how much of a down payment it requires. The exception would be if the bank agrees to entirely forego government guarantees on loans or selling off loans to consolidators who then turn them into “investments” for those who will suffer the consequences.
BravesfaninNashville
July 28th, 2011
12:16 pm
If we make buyers have 20% down it will take a lot longer for the housing market to recover because it will take years for enough people to save $40,000 for a $200,000 home purchase. What’s most important is to make sure buyers are buying homes that are within their means and not above their means. They also need to have skin in the game by requiring some downpayment even if its only 5% because then they will have something to lose if they get in over their heads. I think there needs to be a return to moderation. It was too easy for people to just sign their name and move into a home they truly couldn’t afford long term either because they had an ARM that would later adjust to high for the buyer to keep up or because the buyer really couldn’t afford the house payment once they factored in the other costs of ownership.. Taxes, maintenance and insurance. We need to make homes within reach of average Americans but we need to make sure if they can only afford a Toyota Corolla we don’t lend them the money for a Lexus..
Hootinanny Yum Yum
July 28th, 2011
12:28 pm
Agree. Then people will think twice about locking themselves in a BS loan they, and the bank, know they can’t afford.
Put a little stability back into the market.
Bill Campbell
July 28th, 2011
12:30 pm
Yes!!!!!!!!!!
Lashanawonnika
July 28th, 2011
12:38 pm
“…who fear that would leave homebuyers unable to afford loans…”
That’s how we got into this mess, giving loans to people who couldn’t afford them. So now we want to repeat the mistake?
20% minimum down payment in every case. As someone already noted, you rent an apartment until you save enough money.
LJ
July 28th, 2011
12:39 pm
Bingo – EVERYONE needs skin in the game. We have to stop insuring junk loans if we ever want to see a stable and sane housing market. Owning a home is not a right- it is an investment decide to make if you are financially capable…
If we stop insuring bad loans you’ll see lenders stop giving them out…
dur...
July 28th, 2011
12:42 pm
No. But…lenders can require whatever they choose. How about requiring a lower debt-to-income ratio for less money down? I just purchased a home and was AMAZED when i found how much money a person can owe compared to what they bring in every month and still get a mortgage. There is a lot of greed out there, not just on the lending side, but on the side of buyers. Negligence on the purchaser’s behalf is not a very good argument.
H
July 28th, 2011
12:43 pm
Absolutely!! I hear people say this isn’t going to help the housing market recover…recover from what? Overblown prices, overbuilding, people in homes that they can’t afford, etc, etc?? This is called a correction back to the mean and its well deserved. You can’t expect the value of your home to go up 20% a year, you can’t have people that make $50,000/ year in homes that are valued at over $500,000. How were they affording that in the first place?? A 200 year loan at .5% interest?
Its back to reality and back to basics. If you don’t have enough to put down, you shouldn’t be buying a home. I also think they should start doing more in-depth background checks on applicants. When someone has some marks on their credit, ie bankruptcy..depending on the situation they shouldn’t be getting approved. People need to take responsibilty for their actions and educate themselves. I’m tired about people saying they didn’t know the terms of a loan..if you don’t know then why are you signing it?? Spoonfeeding ends at a young age.
ATLAgent
July 28th, 2011
12:47 pm
@Logic, I bought my first home in 1996. We only had to put 3% down. What year did it change from 20%? I bought my second home 6 years ago and my rate is 5.25 fixed. As a real estate agent, I can tell you that 7% is not the norm. Rates are pretty low right now.
There are some misconceptions about the market. First, rates are still extremely low. However, forcing a person to save 20% isn’t going to help the market. It’ll make things worse. For the working poor and middle class, it will be nearly impossible to save this kind of money.
For the comment regarding ARMs. These mortgages don’t always increase. It depends on the type of ARM you agree to. This is a false assumption. They are not for everyone, but for some people they are a great way to save on their mortgage for a couple of years.
Currently buyers must put 3.5% to 5% down. That’s not a small amount of money and allows them to have skin in the game. If we want the market to recover, we need to allow businesses to set their loan requirements, not the government.
Homer
July 28th, 2011
12:47 pm
Lenders must shoulder a portion of the risk; however, in today’s market you will never get first time home buyers in the market if you require 20% down. If builders could make a profit by selling a home for $100K then maybe we could talk seriously about 20% down. If today’s starter home was built like my parents’ starter home in the 1950’s then perhaps you could create a market for lower income, first time home buyers. Unfortunately no one wants to buy a brand new, 3 bedroom, 1 bath, 900 sq ft home with no central air conditioning, laminate counters and vinyl flooring.
ATLAgent
July 28th, 2011
12:48 pm
One more thing about ARMs that I didn’t make clear, the rate will adjust, but it can adjust down, it doesn’t necessarily adjust up each time. I should’ve made that point more clear.
David
July 28th, 2011
12:49 pm
BravesFan,
if people can’t afford the down paymenton a $200.000 houes, they probably won’t be able to afford the future house payments and will end up defaulting on the loan. The other thing is there are a lot of so-called $200,000 houses that were never worth the money but easy financing made it easier to jack up the price. Builders and finaciers just may be forced to provide housing at reasonable prices and make reasonable profit margins instead of the get rich quick, hit the lottery, wild wild west attitude that ended with the downturn three years ago.
Robert Barron
July 28th, 2011
12:50 pm
20% down would be going from one extreme to the other.
Robert Barron
July 28th, 2011
12:56 pm
We started breaking the economic rules with Reagan’s one trillion per term deficit. Bush 41 and Clinton both continued this rate. Then like we did with down payments, W’s eight years of 2 trillion deficit per term seemed to say, “well nothing bad happened at one trillion deficit so why worry about them at all?”.
That seems exactly what happens with credit.
Tight then looser then too loose.
Bend the economic rules until they are broken.
That’s how u get 14.7 trillion.
Obama may not be the solution but he got W’s lousy hand handed to him as opposed to the good hand Ike got from Truman.
Robert Barron
July 28th, 2011
12:58 pm
If Nixon had run 2 trillion dollar deficits, he might have been a popular guy too. (235 billion dollars with a war during 8 years including Ford’s two).
How can u be popular with that pittance of vote buying?
Pamela
July 28th, 2011
12:59 pm
I totally disagree with this. This will cause the majority of people that want a piece of the “American Dream” to lose hope. This is not a good idea at all.
Michael
July 28th, 2011
1:02 pm
The banks will just lend you the 20% in a separate loan. The same way they financed you out of Property Mortgage Insurance requirements to have a 20% equity cushion before you could drop it.
Point/Counterpoint
July 28th, 2011
1:07 pm
I think Henry’s lead in line says it all – “There was a time”. I agree that homebuyers should absolutely have skin in the game. However, the days when 20% downpayments were the norm, were also the days when a person could go to work for a company and plan on retiring from it as well. Those were also the days when the employees and the managers had shared risk and reward in the company that they worked for and reaped the benefits of their productivity and loyalty. Unfortunately, those days are gone. I’m still suprised that people still utilize the 30 year mortgage. I mean really, how many people do you know that have been with the same company for even 20 years? I’d say that probably 5% to 10% would be a reasonable expectation. Enough to have a vested interest, but not so much that you could lose your downpayment simply because you HAD to move before re-couping the cost.
B.
July 28th, 2011
1:10 pm
It should be up to the lender, but a 20% down payment requirement seems like a no-brainer to me. It shows discipline on behalf of the buyer and as a reward, saves a lot of money for them in points and fees. I put 20% down on my Atlanta home in 2008 and have lost about 7% in home value due to the market. The good news is, if I had to sell my house, I wouldn’t be forced to come up with more cash for someone to take it off my hands. There is a peace of mind in knowing that I am not chained to my property, even if I’ve lost some equity. My guess is that a majority of those in foreclosure did not put 20% down.
The other real estate rule everyone ignored is LOCATION. Those who bought new, big and cheap in the ‘burbs are really hurting right now. Pre-owned, smaller homes in established neighborhoods IN TOWN have held their value much better. I’ll take avoiding commuter traffic over having a huge walk-in closet/bonus room/3 car garage any day of the week!
Carlos
July 28th, 2011
1:10 pm
I disagree. First of all he cost of land and a house costs way less than it did 30 years ago. My parents sit on an acre of land with a 3 bedroom 2 bath house and only paid 1000 for the lot. Now a days you can’t buy a refrigerator for a 1000 dollars. Having people come up with 20% down isn’t the solution. People before they are able to obtain a home should be able to handle their current responsibilities. I don’t co-sign with this notion that everyone should own a home. The reality is not everyone should own a home. I agree that their were people who used tricks and gimmicks to lure people into signing bad loans. However when you are making that type of purchase you should know before you sit down to sign anything whether or not you can afford it and be willing to take something cheaper so you will still be able to take care of your responsibilities. We didn’t put down 20% and me and my wife have bought two houses. Like many we have made mistakes (I know I have) with money but I can look back and say that at the time I didn’t have 20% to put down on a house. What we have to come to grips with in this country is getting back to individual accountability. Hopefully as a result of what has happened this will teach many, including myself a valuable lesson.
Ben
July 28th, 2011
1:11 pm
end govt support of home buying & many things it has its hand in now; it distorts mkts and misallocates resources too much.
Fannie
July 28th, 2011
1:12 pm
Fact: Before Barney Frank, Chris Dodd, Jimmy Carter (Community Reinvestment Act ) and a load of legislations that was (primarily) written by Democrats and passed by both Democrats and Republicans, 20% down worked fine. Folks should have to save their down payment, and pick a house within their means. This is not going to hurt anyone’s chance of getting a house. This is going to cause people to get less house than they had dreamed about. If one has a $20,000 down payment, he/she wont be able to get a $200k-$400k house. They will have to settle for a $100k house. But the monthly savings in payment between the two homes means that they will be able to save an additional $20k over the next three years. So their $200k dream home gets put off by an additional 3 years. Is that such a huge price to pay for a solid economy and housing market?
Because Fannie and Freddie guarantee the most mortgages in this country, the process is subject to political meddling. Google “barney frank home mortgages jimmy carter ” and you can get an itemized list of this meddling. In short, though, this was yet another liberal disconnect between the “ideal world” and the “real world”.
In the “ideal world”, everyone wants a home/house and should be able to get one. This would foster community support and it would cause low income participants to invest time/effort/interest in their communities and schools. The though was that the poor could pull themselves out of being poor by investing in their home and their community. So while Democrats had the best intentions, their 40 year assault on lending standards in order to get lower income participants into the housing market backfired. Republicans were complicit because, well, their constituents were making boatloads of money.
In the “real world”, though, the poor who “bought” houses with no money down were not invested. They had no money at risk. Heck, they might even get to stay a year in the house for free while being foreclosed. These folks never went into home ownership with the idea that they would stay in the house for a long time and become part of the community. They went in thinking that they could buy the house for nothing and flip it when it went up in value.
The banks, after selling the loans, had no money at risk.
The only risk that was being taken was by those buying mortgaged-backed investments. Upon seeing the risk that was being hidden in the market, Derivatives arose that bet against those securities. Soon, sufficient financial leverage was created against those securities by those betting against them to cause a crack. The bubble burst.
What started it all, though, was political meddling with quasi-government entities (FNMA) to relax proven lending standards. Tightening those standards means that people will get less house for their down payment. But it also means that their payment/insurance/taxes will be lower. If they COULD have handled the monthly payment of a house that cost twice as much, they should be able to save up the additional down payment to move up to that new home in just a few extra years.
Chuck Allison
July 28th, 2011
1:20 pm
Yes, down payment should be 20% and interest rates need to get back to 7% in order for things to be stable and healthy. The only exception to the 20% down should be for VA loans.
LB
July 28th, 2011
1:22 pm
I put 45% down on my home in 2007 when I could have put 5%. We did what was ethical and right. Now my $2.4m home is worth $1.2m. We got screwed by the system because of what others did. If I had to do it again I would have put 5% and either forced the mortgage company to adjust or “key mailed” my home back to them. I love the idea of 20% down- gets rid of the people that should be renting.
B.
July 28th, 2011
1:28 pm
LB, Just curious, where did you buy your home? Was $2.4 m the sale price or the appraisal?
Robert Barron
July 28th, 2011
1:29 pm
At 7% interest rates, how much more will our government’s interest payments be?
I am asking but don’t really want to know.
With each bump up in rates, billions more will be needed for interest.
I would prefer to wait.
However I agree the way both parties have run up our debt (while blaming the other) has greatly harmed or cheated our retired savers who don’t want to venture into the stock market.
John E.
July 28th, 2011
1:29 pm
I never bought real estate without putting at least 20% down. In 1979, I bought my first property (a 1050 sf condo) in Southern California for $74,500.00. I put $15,000 down and still had a negative amortization ARM with the low interest rate at 10.5%. I owed more on the mortgage after 5 years than I did when I bought the damn thing AND my payments went up. Remember those days? We may see them again soon!
I now have three residential rentals and a share of a commercial office building in addition to my home. I always put at least 20% down and I always commit to own the property for at least 7 years before even considering reselling it or refinancing. Currently, I am responsible for and paying 5 mortgages.
Some people by virtue of their lifestyle or their job responsibilties are just better off as tenants and do not need to own a home. If you cannot commit to staying in the home or owning the property for at least 5 to 7 years, rent it, don’t buy it. Needless to say, if you cannot put 20% down, you are not committed enough to own real estate.
Unfortunately, in today’s instant gratification society, no one wants to put the money down or to commit to ownership. Flipping houses, liar loans, mortgage fraud and the loose lending policies that enabled such practices got us into this mess. 20% down would cure that problem.
Having said that, I do not really begrudge the old, one time FHA 5% loan (with mortgage insurance) to get someone in a starter home or cond or the VA loan program. But only one FHA or VA loan per borrower per lifetime, after that, it should be 20% down every time.
Logic 05
July 28th, 2011
1:37 pm
10 – 20% down payment should be required.
Yes, it will require some to wait before purchasing…but, it will reduce the changes for another melt down. However, get ready for the NAACP to cry foul if implemented.
budd
July 28th, 2011
1:38 pm
It is not regulations that got us into this mess it is the total lack of control of the process. People who had no business getting a loan for a home were given loans with stupid terms that an idiot should have recognized they could not afford. But they got the loan, interest rates went up (They always do) and what a surprise “we can’t make the mortgage payment”. Then others lost their jobs in the recession (|There is always going to be one) and they too could not make the payment. Then we have the “Must have everything” group who pulled every drop of equity out of their home so they could buy this year’s Beammer. And guess what they couldn’t make the paymnents either. At least with the 20 % requirement you get home buyers who have some semblance of a clue what they are doing by showing they can save for the future. The rest should just rent and complain to the landlord.
Jessie Jackson
July 28th, 2011
1:38 pm
Requiring 20% down payment is racist!
Obama
July 28th, 2011
1:40 pm
A 20% down payment requirement would cause most of my supporters to be homeless. Clearly this proposal is racist!
Understanding Atlanta
July 28th, 2011
1:41 pm
This is an interesting topic. Home prices have increased considerably compared to wages. While everyone needs to have “skin in the game” 20% will lead to fewer people ever owning homes and with the current housing market, rental rates are set to outpace mortgage payments so saving that money is unlikely. 5 – 10% depending on the lender and individual gives that person enough interest to maintain and keep the property. Honestly, even in Atlanta, there’s very few places you’d want to live (not the suburbs that require hour + commutes into the city) that would afford you the ability to buy a house at 100k with a 20k down payment. And with rental rates on a 1br/apt hovering 800 – 1000/month it’s a setup for a longer recovery.
You should put some money down. Yes. But let’s look at the number of defaults between 5% down and 20% down in the current market, and I bet we won’t see a difference.
let'sberealistic
July 28th, 2011
1:42 pm
LB you are a SNOB!
So “low income” people should be forced to rent for their entire life because they can’t afford 20% down? Is that the message I’m getting?
How many of you can support your family~rent, food, utilities, ins, medical, clothes etc~on your salary & still save for retirement & 20% for a home purchase? Be honest. Not many. It would take me at least 10 years, probably 20, to save 20K & I’ll be almost 50 or as old as 60 by the time I could buy another home! God forbid while you are saving something doesn’t come along & wipe you out. Don’t be naive & tell yourself that you are always prepared because how many of us were prepared for the economy crashing the way it did. There is NO WAY to prepare for everything.
budd
July 28th, 2011
1:47 pm
How do you think I got it? Catching a elf for a pot of gold?
What ever!!!!!!!!!!!!!!!
July 28th, 2011
1:50 pm
No 20% should not be the option. Its not the problem, the problem is the banking industry lending money to people who cant pay. When you only have a income of 2K per month, you cant afford a house payment of 1500 per month.
Another problem is that the builders stopped building homes that middle income people can afford. Back when i bought my home, I thought 75 K was a terrible amount. Now 15 years later, my home would purchase new for 350,000. Im sorry but there is no way that home should have jumped up that much.
If builders will build what people can afford and lenders actually have qualifications that prove the buyer can handle the payments, all the other stuff would not exist. 20% will just throw many home buyers right out of the market and finally do in completely the home industry.
Jackson Brown
July 28th, 2011
1:54 pm
Absolutely not…if you want to bury this country in a long-term depression like Japan (to which we are well on our way now), then go ahead.
Jackson Brown
July 28th, 2011
1:56 pm
And this is NOT a racial thing for those of you backwoods rednecks on here…no wonder GA is still stuck in the 19th century…
Michael Adamson
July 28th, 2011
2:04 pm
Stupid! Stupid! Stupid! But then it is Washington … This will completely kill what little is left on the housing market.
First the goverment took all of our deductions, then they took all of our savings and 401K’s, then they took what little value we had in our homes …. so now they want to go on and kill the only market segment that has a chance of pulling us out of this mess which is housing and construction.
“We the people” need to wake up and FIRE everyone in this goverment regardless of party lines ….
Just a quick question? Is there anyone out there that felt Stimulated by the Stimulus? Maybe it’s just me but all I felt was screwed!
Last Word
July 28th, 2011
2:08 pm
I do think that lenders should have some “skin in the game” in the form of reserves.
And i think the borrower should too.
If you can’t marshall together 20% down, then pay the premiums on PMI.
Rabun H
July 28th, 2011
2:10 pm
I agree with Point/Counterpoint. Let’s also not forget that most employees in the US are extremely mobile. Relocation by employees or future employees is still vital to retain good employees or obtain better employees. Many of the people that are walking away from their homes are having to because they can’t sell and a job awaits them elsewhere. Alot of these people have families and renting is not an option. Better school districts have a community of homeowners that support them, most people that rent are not seen as stable.
Our family has always put 20% percent or more down on every home, but we are the exception to the rule – and have been for a long time.
In the No
July 28th, 2011
2:11 pm
I am so confused…
If borrower’s don’t have 20% down, they are required to pay for mortgage insurance. Even through the present crisis, no mortgage insurance company has failed to pay a legitimate claim, none of been in a position of not being able to pay claims and all but one has remained in business. That company stopped writing new insurance, but has continued to pay claims. One new company started.
The problems were with non-conventional mortgages, which didn’t carry insurance. That market is gone.
What problem will be solved by requiring 20% down? The subprime market, which had the problems with the high LTV loans is gone. The prime market, which did not have the problem, continue to require insurance, which means lenders and investors aren’t likely to lose money if those loans go bad. Underwriting standards have been tightened. The new mortgage insurance company, which has been writing policies for a couple years, has not had a single default. Obviously, under the new underwriting standards, the high LTV loans are not defaulting.
So what problem would be solved that hasn’t already been solved by requiring 20% down? The immediate impact would be an immediate stop to new buyers in the market. At a minimum, there will be a five year period for most people to save up 20%.
This is the ultimate government intrusion by people that know nothing.
Peter
July 28th, 2011
2:15 pm
Hasn’t everyone lost their 20% in the last 3 years ?
tim
July 28th, 2011
2:15 pm
20% is good. and no PMI required. It made me buy my 1st home in the correct way that I could afford. People who don’t have much to put down seem to not care what something costs as long as they can make the payment, like people who lease cars. They eventually get in way over their head.
In the No
July 28th, 2011
2:17 pm
Last Word – requiring 20% down would not impact the risk to the lender, as the present insurance coverage really means the risk to the lender on a 95% loan is the same as an 80% loan, but the new rules would make the higher LTV loan more expensive to the consumer and the lender. The point is the way the system works now, borrowers have the choice of getting PMI. Under the new rules, the borrower can get PMI, but will have to pay a higher rate because the government says so. Not because there is additional risk on the loan – if that were the case, those loans would already be priced higher – but just because someone in DC wants to impose his/her values.
The impact on the housing market would be immediate and harsh. Those of us who were responsible, got mortgages and homes we could afford and are presently underwater would fall much, much farther down. Not only wouldn’t there be buyers, but many of would just walk from our homes, which would likely be worth less than half of what most of us owe. It would be silly for the government to trigger this, wouldn’t it?
Jackson Brown Eye
July 28th, 2011
2:18 pm
So who were the majority of the people who defaulted on their loans? I would hazard to guess Shamika was more apt to default on her loan than Hans!!
free
July 28th, 2011
2:19 pm
I only paid about 5%, i’ve never been late on a payment, and i’m still in my underwater house honoring my commitment. sooooo, this is bull. people putting 20% down usually did so with equity from a prior home. they’ll be surprised how few folks really have 20% now and it’s not really a predictor of anything. in fact, a relative put 20% down and walked away after her condo depreciated heavily and the neighborhood went in the tank. she took the loss and now rents in a far better neighborhood.
In the No
July 28th, 2011
2:21 pm
@Peter – absolutely not. The majority of first time homebuyers continue to get PMI. If 20% were required, the first time homebuyers would disappear, which means present homeowners would be unable to sell, which means they won’t purchase non-starter homes, etc. Basically, it would absolutely shut down the housing market.
More people would then walk, flooding the market with more foreclosures. The cycle would likely make it that the post-baby boom generation would never recover the losses. I know the baby boomers, who have made this mess, have no problem leaving the ashes for the next generation. They’ve done enough damage already. Don’t let them do this additional damage.
art
July 28th, 2011
2:22 pm
Whatever happened to saving up your money and buying the house with 100% cash? The very fact that people want to put less than 100% or even 50% down, much less 10% down, reflects the “now” generation. They gotta have everything now, can’t wait for it. Delayed gratification is out the window. It’s that same attitude that gave rise to the drug culture; gotta have the good feeling now, not later. These “less than 20%” people are addicted to material things. Grow up, would you?
Hoofty
July 28th, 2011
2:23 pm
It’s time to get back to what you can afford and not what you want. In the past, people saved up for decades before purchasing their homes. People also took more pride in their homes then too!
Bro
July 28th, 2011
2:24 pm
Not everyone can own a home. Not everyone can AFFORD a home. Just maybe a decent downpayment through a decent mortage company may force some people to purchase what they can really afford instead of what they think they must have. But do not look for help from the politicians, they are the ones making the profit off of us all.
In the No
July 28th, 2011
2:25 pm
The 20% down requirement is meant to protect INVESTORS. You know, the people like Goldman Sachs that have already stacked the deck so they get richer as we get poorer. Wake up people. The only people that will benefit from this new rule are in the INVESTMENT COMMUNITY. Banks will suffer, homeowners will suffer, first time homebuyers will suffer, communities will suffer (when more people walk from homes and taxes have to go up, like in Cobb, DeKalb and Clayton in the past couple weeks.) All of this suffering is to make sure the Goldman Sachs, et al, can continue using the government as its own pit bull.
Don’t be fooled. They are the ONLY ones that benefit from this.
b6542
July 28th, 2011
2:30 pm
I thought we were supposed to have a “little skin in the game” !!
jejgh
July 28th, 2011
2:32 pm
20% min. without question. Easy credit is what got the industry into trouble.
IF YOU CAN PAY FOR IT YOU CAN’T BUY IT !!!!!!!!
Vance
July 28th, 2011
2:36 pm
At Least 20% down should be federal law. If the homeowner doesn’t have the discipline to work, save and plan for the 20% downpayment, then they should be permament renters. Free market is a horrible thing for those of us who behave rationally, plan, save, discipline only to have freeloaders and overly compulsive types move into the neighborhood and bring the rest of our values down.Ultimately it harms the entire market when those who behave irrationally, less discplined people are allowed to own valuable property.
Cleve
July 28th, 2011
2:39 pm
If we want to sell the houses that are currently on the market it is a bad idea.
ali
July 28th, 2011
2:51 pm
Unfortunately, renting costs more than some mortgages so saving 20% is nearly impossible – especially if you are a single parent.
ali
July 28th, 2011
2:53 pm
You have to have extra money to save…with increases in rental rates upwards of $150/yr – it’s nearly impossible to keep your head above water.
ali
July 28th, 2011
2:53 pm
I should have said $150/mth – not year
Milo
July 28th, 2011
3:10 pm
I do not agree, The down payment should be 10% and the loans should stay with the bank and not be sold. My first house when purchesed, Before I got my first light bill, the loan had already been sold.
that is BULL HOCKY.
LJ
July 28th, 2011
3:11 pm
People, please think for a moment.
If the buyers aren’t able to front 20% on 300K plus homes it will put downward pressure on home prices… in the end HELPING the “low income” bracket. Giving people financial liabilities that they can’t afford is not a favor- its a curse.
AtlGirl
July 28th, 2011
3:18 pm
Why put 20% down on a home? For most individuals, that would exhaust their savings. If one would lose his/her job, they would have no emergency fund which would lead to foreclosure quicker. I put down 3.5%. This allowed for me to still have a decent amount in savings for an emergency fund. It does not matter what percentage you put down on a home, if you do not have the money for the payment you just don’t have it.
Andrea
July 28th, 2011
3:26 pm
I put 20% down on my first and only home in 1986. I did not have to pay PMI and got an interest rate that was approximately 2% lower than the going rate at the time. I was able to refinance to an even lower interest rate in the early 1990’s and, despite being unemployed for a time, I paid off my mortgage 10 years ago. I guess I’m old-fashioned, but I do not need a 5,000 square-foot home with 5 bedrooms, 6 baths, 2 family rooms, kids’ room, “man cave”, stainless steel appliances, marble floors, etc. I’d rather live debt-free in a smaller home where I can enjoy life. My parents always told me to live within my means and that there is a difference between “wants” and “needs”. Whatever happened to people taking responsibility for themselves and their own decisions?
BUCK OFAMA
July 28th, 2011
3:28 pm
20% down is reasonable and practical. I’ve bought two houses that way. Evidently, I showed enough financial discipline to earn the privilege. I dint be aksin fo no gubmint chek!
Joe in ATL
July 28th, 2011
3:30 pm
No one is talking about the very real fact that 20% is not really feasible any longer because of flat wages. The average inflation adjusted home price has increased close to 20% since 1980, a period with flat wages. Add to that the massive inflation in education costs and the feasibility of saving a 20% down payment greatly decreases.
I am okay with requiring all mortgage securities to be secured by at least 5% of the loan value by the original lendor. I think giving slightly perferential rates to 20%+ buyers is also fair, however there should be pretty strict regulations on what difference is allowed.
LJ
July 28th, 2011
3:30 pm
AtlGirl- that is the point. If you can’t afford a 20% down payment, you can’t afford the home. Homes aren’t something you typically buy a few months out of school…
Furthermore, small down payments artificially elevate prices.
spfuller
July 28th, 2011
3:31 pm
Mr. Bailey to Mr. Potter: You… you said… what’d you say a minute ago? They had to wait and save their money before they even ought to think of a decent home. Wait? Wait for what? Until their children grow up and leave them? Until they’re so old and broken down that they… Do you know how long it takes a working man to save $5,000?
Juna
July 28th, 2011
3:42 pm
si i get the money form selling WIC milk
Joe in ATL
July 28th, 2011
3:43 pm
@spfuller – If “Its A Wonderful Life” was made today Mr. Potter would be the hero and the poor shiftless “left wing” George would be the villain. How dare he advocate ownership or pride for the worthless working class? Bah they should’ve gone to college or been born to a better family.
Art Murphy
July 28th, 2011
3:48 pm
It should not be law, but it should be good lending policy. I am 61 years old and bought my first house at age 25 and have put 20% down on each of the three homes I have bought in my life. My wife and i did withlut to save the money and borrowed the rest from a relative which was paid back in a year.
uknownuts
July 28th, 2011
3:48 pm
@Chris
It was not “regulation” that got us in this mess. Sub-prime lenders were not regulated at all, and were, therefore, able to make loans with no money down and no documentation as to the borrowers ability to repay. They also did not have to maintain enough cash to keep themselves afloat in a downturn (as banks are required to do). These crappy loans were certified as AAA by the likes of Standard and Poor, bundled together and sold as safe investments to very un-regulated investement companies.
We couldn’t have bought our home if we had to put 20% down, but we could still pay the mortgage even if one of us lost our jobs. Borrowers should have to put something down, but why not just have a realistic target for what someone could pay monthly for rent? If a person makes $40K a year, saves up the $90K to put down on a $450K home, he’s still unlikely to be able to afford the ~$3000/month required to keep up mortgage, taxes, utilities, maintenance etc.
AtlGirl
July 28th, 2011
3:49 pm
LJ – Most people understand that cash on hand is more valuable than cash tied up in an investment that you cannot pull out. Just because you put down less than 20% does not mean you don’t have the ability to do so. Some individuals who put down 20% are unable to pull that money out now because the home values have tanked. I bet if these people would have known that the market was going to tank, they would have thought twice about it.
Joseph
July 28th, 2011
3:51 pm
as someone who is in his first home, a home which will likely be resold to another first-time homeowner, I really hope this doesn’t go anywhere. Finding a buyer will be much harder, and the I won’t be able to get as much for my house as I could otherwise. =(
Joe in LaLa Land
July 28th, 2011
3:52 pm
Evverybody should pay for me to have a home…..it’s only “fair”.
Barney Frank
July 28th, 2011
3:56 pm
Sure glad I pushed that legislation through telling banks that they had to provide loans to Shamika and LaMarcus. I need their votes and this will only hurt those big bad banks (forget that they are owned by middle class investors).
mateo
July 28th, 2011
3:58 pm
Yes, the buyer has more to loose if he/she doesn’t pay the mortgage.
dyslexicbunny
July 28th, 2011
4:00 pm
Someone made one point I really agree with. Most of the houses being built were in the $250k+ range. Some people wanted to skip the starter house phase and jump immediately to the “well-established” house. And if you’re poor and trying to get a house, what the hell are you doing skipping the starter house?
When you’re selling the loan off immediately, you really don’t care whether or not the buyer can pay it back or not since it’s not your problem. If banks want to offer loans to people that probably won’t be able to pay them, then I say they should be required to keep them. That’ll make them think twice about approving loans for houses that won’t get paid back.
I don’t like the required down payment approach. I’d prefer to see reduced interest though as a reward for more down. You’re less of a risk – seems fair to me.
In the No
July 28th, 2011
4:03 pm
People got in trouble because they used exotic mortgage products where the payment changed and they didn’t plan for the payment change. People got in trouble because the monthly payment was more than they could afford. Many people got 100% loans and are still in the houses today, paying the mortgages as agreed upon.
The question isn’t how much money the borrowers have in the home, it’s more are the borrowers sufficiently qualified to make the monthly payment, even if something goes wrong. There are many people who, over the last couple years, saw home prices fall by half, particularly in California, Nevada, Arizona and Florida. Many of those people put 20% or more down, but when the value of the houses dropped, and they realized that money was lost and wouldn’t be recouped, walked anyway.
The point is, there are plenty of people who put no money down and have been responsible, and plenty of people who put money down and still walked. Putting 20% down is no panacea. It’s just government intrusion to protect the already rich investors by scr*wing the average guy.
A young irresponsible couple may get $60k from mom and dad as a downpayment. That doesn’t make them responsible enough to be given a mortgage. A recently divorced dad may want to purchase a $100k condo. He may have an 850 credit score, a huge income, but, because of the divorce, not be able to make a downpayment. Those that think 20% down is some sort of litmus test are taking away the bank’s ability to make a loan to the good customer in this scenario. It doesn’t make sense.
D
July 28th, 2011
4:10 pm
20% down should be required. Home ownership is expensive. It requires constant maintenance. If you don’t even have enough to put down 20%, how are you going to maintain the property? It will definitely weaken housing prices but it will get out the riff-raff. A family bought a house across the street from us using the 8K free money from the government. They have no idea how to maintain a property and have been reported to zoning several times, who forced them to clean up the property. They are the sorriest bunch of people I have ever seen. I don’t think this one guy ever changes his clothing. These people are not homeowner material. 20% down for sure.
Vic
July 28th, 2011
4:10 pm
All these people talking about what people can afford. I ran some calculations and the difference on a $200,000 home a rate 5% with @20% and zero down is about $200. There are a lot of people who can afford to pay $200 dollars a month a lot easier than saving nearly $40,000. But you guys have all the answers. You have that old money you can rely on. It’s sad and pathetic, but it’s the current state of the country we live in.
Joe in ATL
July 28th, 2011
4:23 pm
I just don’t get the “I did this 40 years ago” attitude. The economy is vastly different now with less benefits, no pensions, flat wages, and infinitely more expensive education (and no jobs outside of waiting tables avail without a college degree). What may have worked 40 years ago is not very feasible today.
These people are worse than the cut off the nose crowd. They are the body cutting off the head to spite the neck. They are the poor victims of the dittoheads brainwashing that all poor people (and i hate to break it to you but if you make less than $250K a year you are essentially poor to most of the policymakers and industry makers) are the problem for everything ailing them.
Should 20 percent down payment become the norm again? – Atlanta Journal Constitution (blog) | No Down Payment Mortgage
July 28th, 2011
4:25 pm
[...] Should 20 percent down payment become the norm again?Atlanta Journal Constitution (blog)You get a better interest rate if you put 20% down. Also, the average 30 year fixed mortgage rate is approximately 7% so our current rates are well below the average. You have an outlet for Americans who will need to save for a down payment, … [...]
Fannie
July 28th, 2011
4:37 pm
@Vic… first of all , the “old money” comment is trash. The below $200k home crowd aren’t “old money”
Second, the difference between a $100k mortgage and a $200k mortgage @ 5% is about $600 per month. The point is not to come up with $40k for a down payment or do without (a logical fallacy). The point is that with you come up with $20k, buy a $100k home, and save the $600 a month for a few years. THEN take your equity and your additional $20k and get your $200k home.
20% down is no an impediment to the housing market if there are sufficient lower priced homes. The builder who starts building quality $100k homes in this housing environment is the builder who is going to succeed. It will be a lot easier for most folks to save up $10k than $20k, and to save up $20k than $50k. Someone with $20k in their pockets for a home will be disappointed on two fronts… that it is not enough for a $200k home and that there are no $100k homes at all. THAT is the situation that must be rectified immediately.
Vic
July 28th, 2011
4:57 pm
So Fannie, I work my tail off, but you tell me what house I can buy and how I should buy it? Buying and maintaining a $200,000 house is very doable. What’s not doable is the down payment. THAT’S IT. You haven’t proven how my comment is trash, and that is one example of how there are those who have $40k lying around or in a trust fund. The truth is, YOU JUST DON’T WANT ME LIVING NEXT DOOR TO YOU.
Le Bourgeois
July 28th, 2011
7:10 pm
The government should not regulate how much a person pays down but rather that banks stick with the loans they make and not sell them off on the derivatives market as this caused the catastrophe we are in now.
Mandating a certain down payment will essentially lock the housing market down and completely kill American mobility. If I were to get a job in another state, I already have a hard enough time selling my home but I will never find another buyer for my home as potential buyers are stuck as well because we cannot purchase a new home until we sell our current one (assuming we get 20% down payment on the next home out if it). Some markets have little rental capacity and this is a sure way to raise rent prices.
Further, homes and cars simply cost more today as a percentage of income than did many years ago like in the golden days of the 60’s the proponents of this rule claim to harken back to. 20% is a tough goal to achieve in this day and age regardless of the current economy. It’s just a different world now.
Le Bourgeois
July 28th, 2011
7:16 pm
Well said Joe in ATL
GaNative
July 28th, 2011
7:17 pm
OK, one more time. We didn’t get into this mess by giving loans to people who could not afford the house. We got in this mess because we let their jobs go offshore and to Indians they import here by the boat load. With no Job, people could not afford even a very good and decent mortgage. The truth is that many minorities and lower middle class Americans were always given the bad loans. They gave them high interest rate loans because they considered them a risk. But people paid those bad loans as long as they had a job.
Vic Tim
July 28th, 2011
10:54 pm
No Vic……we don’t live next to you in Lithonia and all the other trash that lives out there.
stevenmathis123
July 29th, 2011
5:18 am
It pays to shop around for a mortgage refinance. Mortgage rates have gone down like anything. My brother in law just got a 30-year fixed loan at 3.76% He told me search online for “123 Refinance” for the lowest rate.
JimmyT
July 29th, 2011
9:49 am
Maybe if more lenders kept and serviced their loans their vetting process for applicants would be better. If a lender is selling loans, those loans won’t be their responsibility very long, so their due diligence is likely to be limited. It’s become a shell game of who owns the loan now? The government just mucks up everything just like it always does. Their intentions may be good but their results are always more costly and inefficient for the business owner and customer alike.