20% cash downpayment buying house.

[sigferl]

Here is a commentary at finance.yahoo.com that helps to explain why at least 20% cash downpayment is necessary when buying a house, irregardless what the banks or realators say.

The Mortgage Crisis: The U.S. vs. Denmark
by Jack M. Guttentag


Danish mortgage banks do not adjust the interest rate for points, nor do they tack on a series of fixed-dollar charges to cover specific expenses, as is the practice in the U.S. Total upfront fees are modest and pretty much the same at all the mortgage banks.

The strength of the Danish system consists of its transparency and low origination costs. Its major weakness is that it does not serve as large a segment of the population as the U.S. system. Loans are not priced for risk, so borrowers who have poor credit or who cannot make a down payment of 20 percent are not served. In a financial crisis, however, this "weakness" is a source of strength, as we have recently learned.

God Bless America

[HRx]

20% down payment has always been my practice for financing larger purchases, cars, houses, boats, etc. A person also needs to ensure they can actually "afford" what they finance is also critical practice too----if you're crying about the monthly payments after 90 days, you can't afford your purchase.

[HakunaMatata]

I'm sure some people would be in a better economic position if they had submitted substantial down payments. Unfortunately, a 20% down payment doesn't mean much when jobs aren't available.

I put 20% down on my house nearly ten years ago. I refinanced, withdrew a rather insignificant amount (less than my original down payment), and "invested" in my house (because "good" homeowners strive for increased equity). Presently, I'm underwater by approximately $60k. That 20% didn't do much for me and it surely didn't help that I was unemployed for a year.

Clearly, there were numerous lending flaws. I believe culpability rests on both lenders and borrowers. The housing bubble burst is a factor in our declining economic state. It is not the exclusive cause.

[FLBK7]

Thanks for your post HT. I respectfully disagree on some of your points.

1. The larger the down payment the better. I you would have put 50% then you would be much better off then you are now so a larger down payment is almost always better. Ignore banks and realators that allow a smaller down payment.

2. I agree, good home owners take care of their house. However, the repairs/improvements should come from earned income and not from refinancing monies.

3. From the finance articles I read, the housing/CC debt problem was one of the major triggers of this recession which led to job loss, not the other way around.

Welcome back, sigferl. Yet another one of your identities is now added to my ignore list.

[JimKutkowski]

The price of real estate exploded because mortgages were available for people who put very little down, in fact some got away with putting nothing down to purchase a home.

If we lived in a country where you record with 20% down to even qualify for a mortgage, our home prices would be about half of what they are now, something that the article ignores.

I'd be all for a 20% down payment requirement if I believed it would restore sanity to the market, but in the United States, getting around the rule is an art form, and I'm sure greedy salesmen would find a way around the law for a fee, thus increasing the cost of borrowing without making the market any more secure.

[nc73]

20% down really only helps the banks, not the buyer. If you can't pay they foreclose and they get more money back. I didn't get a dime when mine was foreclosed on and I had put down 20%. Complete waste of money there. I could have put that 20% to better use.

[StartingOver08]

Welcome back, sigferl. Yet another one of your identities is now added to my ignore list.

Yep! He is not even very creative...I think we have seen the a version of this name before....

[DebtEnder]

Yup just add to the ignore list. Hell she/it/he posted in the same thread as it made before. How obvious is that.

And 20% down how does that help the buyer? It helps the banks not the buyer. It mitigates THEIR risk, not yours.

[OhioFiler]

Multiple Personality Disorder comes to mind here.

God Bless the USA.

[AngelinaCat]

This thread has outlived its usefulness--if it had any in the first place--therefore it is closed.