Down Payment requirements are the problem

Real Estate Agent with

Down Payment requirements are the problem.Yes, we need to stop foreclosure. However, no mater how low prices get, most people cannot buy due to the lack of cash on hand and/or willingness to part with it.

This news paints a picture why banks will simply not lend money to (virtually) anyone without 20% down payments (there are exceptions.)

The reason being that if home prices continue to drop, homeowners are less willing to pay their mortgage if financial problems arise as the home is worth less then they paid. They can simply , and often do, just walk away from the home. Thus, the banks foreclose on the homes and lose money.

In order to combat the liquidity problem, the Federal Government has made a bold move today and announced, “The government has introduced a pair of new programs that will provide $800 billion to help unfreeze the market for consumer debt which Treasury Secretary calls vital to supporting the economy.”

The FED says all “the government programs have been aimed at supporting the lending that is vital to the economy.” I applauder the move by the FED and am optimistic that the new Presidency will continue to do everything in their power to protect banks by insuring loans, thus make mortgage loans available to qualified buyer, supporting purchase and sales of low priced foreclosures, clearing supply of homes and stabilizing Phoenix AZ real estate prices.

Once, the bleeding stops, we can build a foundation towards a Phoenix AZ real estate recovery and a national economic recovery.


Copyright © James Wexler

If you are listing your home as a short sale in Phoenix Arizona or Scottsdale Arizona make sure you hire an agent who knows how to do short sales and has the experience to get the job done.

Call 480.221.8080 to find out more about Phoenix AZ Short Sales and Scottsdale bank owned homes


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Suzanne McLaughlin
Sabinske & Associates, Inc. (Albertville, St. Michael) - Saint Michael, MN
Sabinske & Associates, Realtor

Yes, foreclosures are a problem, but it's the inventory that's dragging everything else down.  We need banks to lend, we need fewer homes that continue to decline in value......

Feb 14, 2009 02:55 AM #1
Shirley Parks
Sands Realty 210-414-0966 - San Antonio, TX
Broker, 210-414-0966, San Antonio TX Real Estate

Hi James, There are very few first time home buyers that can put 20% down in my market.

Feb 14, 2009 04:18 AM #2
Larry Bettag
Larry Bettag - Cherry Creek Mortgage - Saint Charles, IL
Regional Vice-President

Inever thought of it that're right.  Home owners don't want to pay a mortgage when house is worth less than what they bought it for.....

Feb 14, 2009 07:25 AM #3
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

It's very rare to come across a first time buyer that has 20% laying around for a down payment.  However, there is financing available for those with less.  But I'm becoming old school in a hurry, and really believe buyers need to have some of their own funds invested in their home buying experience.  And as you say James, when the bleeding stops, we need to look for better ways to keep us from being in another situation like the one we now find ourselves in,

Feb 14, 2009 09:13 AM #4
South Austin Real Estate Blog
Sky Realty South Austin - Austin, TX

James, I think responsible lending practices went out the window and now the whole economy is paying for it... what is the cure? time maybe?  until prices quit declining, buyers are relucant to buy.. .that makes total sense to me.  Stop the decline and heal the housing market.  Why would anyone pay for a $450,000 mortgage that is now worth $300,000?  How many years will the homeowner have to pay on a mortgage that is below a wholesale price?  I don't have the answers,  I was hoping we had elected the best minds in our country to find some answers. or find the people who could find the answers?  Hope springs eternal.

Feb 14, 2009 10:44 AM #5
Russel Ray, San Diego Business & Marketing Consultant & Photographer
Russel Ray - San Diego State University, CA

It's the same thing with low interest rates. The rates could be 0%, but if no one can come up with the cash down payment, or their credit score is not quite good enough, that 0% is just like 20%.

Reminds me of the clothing store suit sales that were all the rage when I graduated from Texas A&M in 1977. I could buy one suit for $999 and get the second one free. Well I didn't have $999 to buy the first one, so the second one might as well have been $999, too.

Also reminds me of the grocery stores here. I'll go to Ralphs and use my club card to save money. When I check out, they are happy to tell me, "You saved $29.04 today." Uh, no. I just spent $147.51. I didn't save anything. Now if I go home and put that $29.04 that I didn't spend into my savings account, then I would save something.

Feb 15, 2009 06:44 AM #6
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