There was a time early in my career where whatever you bought here in Santa Cruz County needed a 20% down payment unless you were a veteran. That morphed with the high interest rates of the day to some creative terms and loan structures with names like AITD, Wraps and the like. Seller carry back financing was needed to make peoples lives go, on as lenders were caught in rising costs. We then started seeing 80-10-10 deals, which was 80% bank financing, 10% seller second loan and 10% down payments. As time went on the values went up, and virtually no veteran loans were done in this county as the home values were more than the VA would lend.  

Then we started seeing 5% down loans, but these required mortgage insurance ( MI) or(PMI).This private mortgage insurance paid off the lender for risks that they took with a very lightly secured loan. This insurance was paid for by the borrower. For many years this cost was not deductible and people did not like to use this, but it enabled them to buy a home. This was before adjustable rate loans were invented. Most people now can’t do seller carry back loans much as they need their equity to go to their next home


So flash forward to 2005-7, when our lending debacle occurred when lenders too stupidly took unsecured risks with 100% loans. Not that 100% loans are bad inherently, but when you couple that with no reasonable income and crappy credit, it is a recipe for disaster. And so we have it now, where you need some of your own funds to buy a home, unless you get a restrictive and costly FHA loan.

So in a knee jerk reaction, and certainly in some areas reasonable, we have gone back to the 20% down loan. Yes there are some loans with 10%, but you have better terms with 20% down. Lenders make money selling money, not foreclosing on homes. Short sales are just one step before the foreclosure process, but it is the same path. Lenders because of their stupidity, have gone bust and someone has a site that monitors that, called the Mortgage Lending Implode-O-Meter.

If you think your bank maybe heading towards insolvency, you might want to check it out. There are many mortgage brokers that have gone out of business as well. Even the good ones are having a tough time because volume has dropped dramatically. There are great opportunities to buy Santa Cruz real estate at a discount, but there are some great values in Live Oak, Aptos and Watsonville as well. If you want to check out some of the Santa Cruz California real estate values, you might find a nice retirement home by the beach. Call me at 831-818-7524 for help in finding a great investment or home.