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Is now the best time for buy? Smell the coffee

By
Services for Real Estate Pros with Charisma Media Group, LLC 50622

Yesterday, I received three responses that disagreed with the amount of down-payment I suggested (20%) for first time home-buyers. The gist of the disagreement was: "There aren't many first time home buyers who have that much to put down..." I welcome and respect the opinions and comments I received. Thanks, for taking the time.

And here's bit of a rebuttal.

With the recent mortgage debacle, not yet behind us, home buyers who have to borrow have fewer choices, The FEDS are putting up more of the cash than private lenders, who saw investors flee in droves from mortgage-backed securities to other, less risky investment vehicles.

Now, I am no prophet, but I do believe it's going to take awhile for all of this to settle down. I am all for folks owning and and STAYING IN their own homes--but the reality is qualifying requirements for borrowers are becoming what you'd expect--more stringent.

So, all I am saying is the more one has to put down, the better. I am also saying, for too long, things have been too easy. (Home ownership is not a "right." Lenders and consumers have not been prudent. Greed, and comsumption, fueled by consumer debt, have ruled.)

I will admit that maybe 10% down is in the "twilight zone" and a bit optimistic and seemingly impossible for people to save for a down-payment.

But is it?

In one of my comments yesterday, I related the story of a buyer client I was privileged to serve last year: In one weekend, she picked a home, and we closed in less than 30 days. She paid CASH--$150,000 in cash. She and her husband  are in their 50's; this was their FIRST HOME. She has a cleaning business. She and her husband SAVED that money over the years to, one day buy the home of their dreams.

They OWN their home. No one will ever be able to take it away!  And, it will pass down to their daughter when they are gone.  Some might say this is old fashioned, depression era idealism--for me, it's a breathe of fresh air.

I have such respect for these hard working, principled people who have a backbone and the discipline to do the right things, in the right ways, for the right reasons.

If you happen to have a copy-of today's  Wall Street Journal--grab a  cup of coffee...we'll all take a stiff whiff--and please see the front page story--"Mortgage Crisis Extends its Reach."

Posted by

John March

843-368-9146

Comments(8)

Phaedra Hubbard
My Florida Home Store - Clearwater, FL
Clearwater, Dunedin, Palm Harbor Real Estate Exper

I really don't mind a buyer financing 90-100% as long as they can easily afford the payment. If someone is paying $1200 in rent and they can find a mortgage company out there to finance a home for them, why not pay $1200 a month into your mortgage instead of a landlord.

I don't agree with the people that gets mortgages they can't afford, but that is an entirely different topic.

Nov 13, 2007 12:51 AM
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos
John,  To arbitrarilly put a 20% downpayment requirement will limit the pool of new buyers ( and repeat buyers also ).  This is surely a situation where we should use a case by case criteria.
Nov 13, 2007 01:20 AM
Peter Thompson
Downers Grove, IL
Chicago Mortgage Insight
John,Having a larger down payment is great, but the vast majority of buyers with low down payments have paid their mortgages on time and built a stronger financial future through home ownership. The down payment has always been the biggest obstacle to buying, and having more options has allowed more people to buy. This strengthens communities, and builds our middle class. Low down payments haven't been the major cause of our current mortgage problems. The big problem loans were those where the income was not documented and the credit was sub par. But even in the subprime sector well over 80% of the borrowers are paying on time and improving their situations.
Nov 13, 2007 02:16 AM
Hugh Krone
Weichert Referral Associates - Hamburg, NJ
Realtor, Sussex County NJ
John its the very fabric of the society that we live in. I don,t think they should give mortgages with less than 10% down and 20% for the best rate.Everyone wants everything right awaythese days, I sa drive used car, work an extra job forego 300 stations on the sattlelite tv and make your coffe at home. Maybe even eat at home when you do buy that first house it will really mean something to you.
Nov 13, 2007 10:49 AM
Alexander Harb
Knights Investing - Mesquite, TX
Dallas, Texas Real Estate Investing

Awesome...a family that SAVED for years to buy a home...whoda thought?????

That is just not done anymore..... debt has become the norm...

=-(

Nov 13, 2007 11:57 AM
Mike Klijanowicz
Cummings & Co. Realtors - Perry Hall, MD
Associate Broker @ Cummings & Co. Realtors
I agree with you, I love it when I find clients who are "fiscally resposible" people, but they are few and far between.  Many of my new prospects are in credit counseling and have loads of debt because they have bought into the "GOTTA HAVE IT NOW" mentality that is shoved down our throats every time we turn on the television or listen to the radio.
Nov 14, 2007 12:14 AM
Robert L. Brown
www.mrbrownsellsgr.com - Grand Rapids, MI
Grand Rapids Real Estate Bellabay Realty, West Mic
The exception NOT  the rule. In this day and age some buyers scrape for just 3% down. They deserve the same as the person with 20% down. Just my honest opinion.                                                                                                                                                                 
Nov 14, 2007 09:34 AM
KC Coonc
Windermere Real Estate/Whatcom, Inc. - Bellingham, WA
Bellingham Commercial Real Estate

John, One would want to think that saving the entire payment to purchase your first home for over thirty is a novel approach. The problem with this story is that those same people committed to paying someone else's mortgage for over 30 years in the form of rent.

At the point in their life if they committed to a purchase when they had 20 or 30% down they could have leveraged their money and at the age of fifty likely would be living in a $300k home. Leverage is the key to real estate regardless if it is your home or investment. Leveraging your self conservatively within your budget will build financial security. It is too bad these folks didn't have someone explain this in detail to them before they were 50.

Nov 14, 2007 09:58 AM