3% Down Payment, Bad Idea?

Discussion in 'Buying & Selling Real Estate' started by turt, Dec 13, 2014.

  1. turt

    turt Guest

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    First time home buyers will be able to buy a house with a 3% down payment:
    http://www.cbs58.com/story/27610855...own-payment-option-for-first-time-home-buyers

    What do you think about this new plan? I really don't understand how anyone who can only afford a 3% down payment can ever afford to move. And what happens if they can't afford the house in the near future? How would they even afford the cost doing the sale?
     
  2. Rainman

    Rainman Senior Investor

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    I wouldn't say it's a bad idea. Someone could have an investment somewhere that will start getting him some money after a number of years. If they feel they'll be able to buy the house then a 3% down payment is bad. Supposing that person has only been recently employed and as yet hasn't saved enough money to make a a down payment of 20% and more?
     
  3. Rosyrain

    Rosyrain Senior Investor

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    We have been looking to buy a new house in the next couple of years and the brokers that we have talked to have told us to expect at least a 10% down payment. The 3% down payment sounds like a recipe for a disaster just like the 2005 numbers in which people could get into homes for nothing down. I was one of those who was duped by that and it did not turn out well for us. I would rather pay a higher down payment and make the mortgage payments lower.
     
  4. JR Ewing

    JR Ewing Super Moderator Staff Member

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    It will be good for some buyers and not so good for others, and will probably be beneficial to prudent lenders over time. Of course economic recessions and other disasters will make things more difficult. And loans that are sold right after they are booked will tend to make the original lender less cautious and perhaps more likely to fudge on things.

    I bought several homes with no money down other than closing costs some 10-15 years ago or so.

    As long as the lenders are careful and are able to lend and buy loans based upon credit worthiness, stability, etc, it will probably make them money over the long haul. Most buyers will pay on time, some will have a little trouble here and there but still mostly continue to pay over time, and at least a few will burn them right away or within a short time period. A few here and there will also pay like clockwork for years on end and suddenly burn them out of nowhere - human nature.

    But if lenders get too reckless or are forced by government or others to lend based upon other factors that have nothing to do with credit, time on the job, income, stability, debt levels, etc - this always causes problems.
     
    Last edited: Dec 13, 2014
  5. My401K

    My401K Well-Known Member

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    It is much harder these days to get a mortgage, sure they might tell you that 3% down is all you need, but realistically you need at least 10-15%, 3 % might go towards the principal but I can pretty well guarantee you will be hit with closing costs and taxes that will bring you in right at about 15%. Don't fall for all the hype, right now there is a serious push by banks to turn over some of those foreclosures. In that case if you do get a foreclosure, make sure you have additional liquid funds because many of these places need all sorts of things done. Even a new build left to sit empty will need things repaired and/or replaced.
     
  6. Investor

    Investor Well-Known Member

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    A 3% deposit on homes for home buyers is definitely what the world needs, heck! why was there a 20% deposit on homes before now? how does that make the real estate industry more viable and people's dreams of achieving a home at an early age possible? I welcome the 3% deposit policy, this is great! Now, All you have to do is get that 3%, along with other fees, and get that house! a clear 17% will be saved and you can put that into paying back a mortgage, if you're going to have one. So, I really see no negatives on this policy or implementation. I am a supporter! Ha, I would love if home deposits could go as low as 0.5% too! the real problem would arise when there is no deposits on homes, because then, a person will have to find the full cost of the house, or pay an extended mortgage, with a high interest and loan rate for...ever. So again, go 3% and how soon is the 0.5% coming? lol
     
  7. Gelsemium

    Gelsemium Senior Investor

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    This is intended to boost the real estate market, to create another bubble, so guess what, bubbles do pop, so I wouldn't want to be there when it happens.
     
  8. SteakTartare

    SteakTartare Senior Investor

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    I wouldn't personally go that route, but it could work fine for some borrowers and lenders. In fairness, though, I've never liked debt, so a sizable down payment is something we put down.
     
  9. KevinHelen

    KevinHelen New Member

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  10. Gelsemium

    Gelsemium Senior Investor

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    The main issue here is, if lenders and borrowers give the money with warranties of getting it back I am not sure if that is a good deal, better if some serious warranties are offered.
     

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