Misidentification / Have Nots / Undeserving

Where did you hear agents saying that buyers without large down payments are "underserving" of a home? I explain to my buyers that the bank will most likely require a larger down payment than in the past. And we all know it's because the banks want to cover their butts. But I've never heard anyone say the buyers didn't deserve a loan or a home.

BRAVO...Thanks for being so brutally honest.  I have read through a lot of posts here on AR about the end of Down Payment Assistance, and some of them have been awful.. I agree with you completely... Thanks for reading my mind so eloquently LOL

Bill ~ Another great post from a man who has a heart towards the American dream and not towards the bigots who are trying to make buying a home more difficult than it needs to be.

I don't think that NOO are buying multiple homes using FHA and non profit DPA at the same pace they were back in the day.  Stated income, NOO, 100% is proving to be a noxious combination in our market.  Lots of people lied and showed that they were OO when they were not to get conforming rates.  No one seems to check on or police that.

That doesn't make a first time home buyer undeserving of anything.  I have seen what you are talking about and some of it does rise to the level of bigotry.

It is amazing how the government will always bail out the large institutions but not the average guy. Homeownership is good for all, even those who can afford payments and not have a large down.

Remember, what I see and hear may be totally different than what you see and hear.  It is OK to respectfully disagree with me Bill :)

I think that underwriting guidelines are a complete sign of what is going on to kind of prove what I am saying is in fact happening in droves.  We see an upsurge in the default rate of 100% loans, then 80/20 piggyback programs are pulled back.  We see an upsurge in the default rate of NOO properties, then buyers must go through many hoops to PROVE they are living in the home.  We see an upsurge in the default rates of people who just recently went out to buy a new, second home similar to the one they had prior (which is upside down and defaulted on soon after their new purchase) and we see underwriting guideline changes with higher down payments and equity requirements.

With every BPO I perform I check tax records, recorder's office (for current liens) or past history.  The recorder's office tells stories, you see two, three, four properties in default with the same lender.  Tax records indicate the type of loan.  MLS History shows rental history.  I would say about 80-85% of the BPOs I perform would show NOO, bought in the good ole days with 100% financing.  Yes I have even seen some phenomenal concessions to the buyers (10%) who obviously had no intentions of EVER paying a house payment.  Maybe I am unlucky with receiving 80-85% of total BPOs showing some sort of possible fraudulent activity.  Maybe I am unlucky to hear cavalier attitudes of people who lost value on their speculations because "letting it go back" is heard all to common like it is something tres chic to do.

It is extremely unfortunate in the town we live in that we lost 100% and stated programs at close to conforming rates.  That helped MANY tipped income workers from our very unique economy get into homes that they otherwise could not get in to (at the moment unless they changed their compliance.)

Luckily FHA is still a miniscule 3.5% down and VA is no down.  I wish non profit DPA wouldn't go away because many people do need a little extra help.  Right now, good luck writing a contract w/ DPA and getting it accepted at under a possible value it can appraise for.  Our market forces are barely allowing for that.

Unfortunately for the sins of the past, underwriting guidelines continue to change and get tougher because of the newest "let it go back to the bank" scams and buyers who DO deserve a low down will have to jump through more underwriting hoops to make it all happen. 

I am not exactly saying there are no hard luck tales out on the streets, there sure are!  They are not as common as one would think.

Bill:  I think we both agree with your last comment :)  Builder's lenders drive me nuts!

Last time I checked banks were in the business of loaning money to the homebuyers and that was a risk itself.  Now you are saying that they should be mutually at risk with the homeowner (who is living in the house by the way) by not having any of the homeowner's own money tied up in the property ?Should the bank also pay for repairs if the poor seller buys a house and something breaks? 

No wonder the houding market is in the current state it is in!  No one expects homeowners to be responsible or accountable for anything.  Let's pass all of the risk on to the big corporations and not the poor little homeowner because they can handle it.  But then when we find out that the big corporations can't handle it and go bankrupt let's get mad at the government for having to bail them out.

The bottom line is that people who cannot afford to come up with even a minimum downpayment of 3% CANNOT afford to buy a home.  I would guess that 99% of the time it is way cheaper to rent or live at home with mom and dad than to pay a mortgage and associated homeownership expenses so if there is no room in your budget to save there is certainly no room to buy.

Bill,

I'm not offended at all.  I just don't understand why if people can afford to come up with a downpayment why they don't just wait and save for it instead of relying on down payment assistance programs etc.  In fact, if more people had elected to wait to purchase a home while they saved for a downpayment (I'm referring now to people who have purchased in the last couple years) they would most likely be paying less for their home due to falling prices (in some cases a lot less).

Michelle (Not Terri???)

There you go Bill.  That is the reason why we disagree.  You are assuming that it is cheaper to buy than to rent and I am assuming just the opposite.  To give you an example, in my area the property tax rate alone is something along the lines of $4400 for a home assessed at 100,000.  Add homeowners insurance and you are looking at paying $5000 per year before you make your mortgage payment.  You could probably rent a nice 2 bedroom apartment in the area for about $750.  You could not find a home on the market for anywhere close to $100,000 or even assessed at that rate for tax purposes.  You are also neglecting to mention the maintenance/repair costs associated with owning a home which are minimal for rentals.

I am sure in some areas of the country the difference is not so great.

Bill, worth the read and a star!  I have a lot of thoughts rattling around in my head with this subject matter and some pending posts.  I'll revisit with more comment.