Seattle Bubble Forum Archive

First of all, I'm a renter. And I'm new here, so forgive me if this has been brought up before...

But if they're talking about requiring 20% for a down payment like in the old days, people will never again buy homes in large numbers.

We live in a country with something close to a -1% savings rate, and people's stupidity keeps the economy going. Joe Public spending 101% of what he makes is good for local merchants.

Here's my question - has anyone personally seen this type of credit tightening?

I realize that banks need you to have some skin in the game so you can't just walk out on the loan, but 20% seems like they'd be committing suicide.

Even if the average Seattleite saved 10% a year and made $50k, if a house is $400k and he needs $80 to get his foot in the door, it would take him SIXTEEN YEARS to save up the cash (and plenty can happen in that time). And fine, even if the banks cut their requirement down to 5%, you're still looking at four years.

It's the right thing to do, but I don't see banks enforcing it. In fact, I think they'll get pressure from the federal government not to, because cash marinating in a savings account isn't keeping the economy going.

I think it'll be interesting to see how this element of it plays out.

If you have good credit (700+ FICO) and any sort of money at all (like, say a 401K), you can still get a 0%-down 30-year fixed with little problem.

Who knows how long it will stay that way.

I can pretty much guarantee we aren't going to see 20% requirement instituted, however. I don't think there ever was one, but maybe someone can correct me. Maybe in the 40s or 50s.

How does one afford a 400k mortgage on 50k/yr without at least 20% down?

I would consider 50k/yr to be a decent wage.. If an individual making a near-median wage can not afford a lower end home, there are bigger problems than a 20% requirement--which is necessary to make payments manageable in any case.

When I purchased in 1996 you had to either put 20% down or get PMI. I do not know if this 80/20 loan thing will be good enough for the banks.

I actually could pay 20% now for a entry level house in this market, but I see it as an extremely risky use my the capital I've worked so many years to build.

As far as I've seen, people can lie and not pay PMI, if they get a second loan to help come up with the remaining 20%. I'm not sure if this is the norm, but I would be very nervous doing so.

If people have to put 20% down for a house, they will start saving again...