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6 Comments on "True value"
I agree with what you say. It's better for everyone when a buyer has something invested.
It is good when buyers have to put their own money into the deal.. They won't be so eager to bail out.
Here Here and it should have been that way all along. But I don't think we learn anything we just find away around it, hint S&L
I think what has happened is that we've been lowering the standards for entry level (and ultimately, ALL) buyers.
Twenty years ago income ratios for a 1st time buyer was 25% / 33%, you had to have 3 months savings leftover after closing, and your credit cards were counted at the minimum payment as if your maximum credit line was used.
In recent years, 1st ratios of 40% + were used for buyers with good credit. Second ratios of 50% were common. Credit cards were only counted for the minimum purchase, no matter how many credit cards you had. All that mattered was the fico score, in my opinion.
I believe this is a result of a low national savings rate. Expenses such as Student loans are much higher today, almost everyone has a car payment or lease, many now have health insurance co-pay premiums, and local real estate taxes and insurance are exhorbitant (in NJ at least).
What really is at issue is that even if incomes kept pace with inflation, they are not high enough to create any SAVINGS, or even surplus funds to pay down debt. I believe many are supplementing their lifestyle with debt, and in the case of existing homeowners, equity lines of credit. All this is masking the real wealth-income data in the US.
I agree sir, buyers do need to have a stake in the purchase.
Reflecting on the slander of no income verifier programs... It isn't that NIVs are evil. They performed successfully for years BUT 20% to 35% down payments were required. I'm not advocating huge down payments, I'm just agreeing that some stake in property reduces casual foreclosures.
After recovering from the S&L that Charles refers to, we kept bending the tree the other way until we ended up in the current mortgage debacle. Now we are bending it back again.
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