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      07-17-2012, 12:56 AM   #67
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The argument that you shouldn't put 3.5% down because you can default is moot.

There are reasons to put less money down, as there are reason to put more money down. It's a case by case basis.

In order to qualify for the FHA you first need a solid credit report/history as well as decent income. These same people putting 20% down could default as well. Sure data might show that those who have 20% down won't default at a rate of fha borrowers, but that's moot for the topic on hand.

We're now discussing personal investment situation, why buy a house anyway if you want to go there? it's just like the whole rent vs buy.

Yes, I agree many people do overextend themselves, it's human nature, and the practices of the bank didn't help. Greedy is what greedy gets.

OP said he does not have 20%, so I would still ask you to reconsider if what you are doing it right for you, given the homes are only 100k supposedly which is incredibly cheap compared to where most of us live it seems.

I myself don't like the idea of even taking a mortgage out, I'm one of the few who believe if you can't buy the house outright in cash you shouldn't buy it. But peoples have diff needs, and they don't teach these things in school.

Buying a big ass house can feel like a dream, until shit goes bad and you don't even enjoy it. i've seen to many people go through this.

Priorities need to be set up properly, but this is not the topic of discussion however these questions tie in greatly with other aspects of ones financial capabilities.

OP as you see, if you really want us to decide the best course of action for you we need details, employment, income, some background, credit history/scores, buying a house is not a simple thing, finding a house is just the beginning, the steps to buying a house begin with personal fundamentals, and it seems like you didn't ask yourself these questions so we can either stay on topic or simply hijack it with personal finance discussions.
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      07-17-2012, 10:21 AM   #68
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Quote:
Originally Posted by MediaArtist View Post
Exactly.

We're on a forum we're people are driving $35,000 cars, and complaining about being able to save $40,000.

Somewhere, priorities are mixed up.
While I still think not every home purchase necessarily requires 20% down (case by case basis as someone mentioned), I'll certainly agree with you on that point. I'd suspect many of those $35,000+ cars out there are on leases as well. Figuring out financial priorities seems to be a widespread problem for people across the US, most likely because they have never really been educated on it. Would it be that difficult for high schools to require students take a personal finance class?
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      07-17-2012, 11:09 AM   #69
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As a general rule of consumerist behavior, people tend to get the maximum of what they can afford (or get a loan for). That's why I find it funny that someone will paint a scenario where some clever investor will buy a $300,000 home with 3.5% down, and then apparently take the other money he has an invest it in higher yielding "investments", yeah that's going to happen and I'm sure Tupac and Biggie live in Cuba with Elvis and Michael Jackson.

You see this reckless behavior all the time just by browsing this forum.

Random Thread: "Hey I have $20,000 [in credit] to spend, I just got rid of my 335i because of a financial situation [got laid off, but found some part-time work at Walmart, graveyard shift rocks!] what car should I get? btw, I'm in school, living in a 2 bedroom apartment with 4 of my buddies so my rent is only $500 a month!"

It usually turns into a discussion about GTI's, or used Audi's, or whatever car will fit absolutely into $20,000 without anything left to spare. That's simply how people operate, in general, in this country. It's all about excess, and not about restraint.

FHA has become a sick parody of this behavior. Did you know in California, the FHA conforming limit is $729,000? That means someone with a mere $25,000 can go get a gov't backed mortgage for a $729,000 home as long as they have a minimum 620 credit score, and can "afford" a 41% back end payment. That's financial insanity, yet it's fully gov't supported and backed. The real question is, why is the gov't even backing 3.5% down, $729,000 mortgages? Is it to get families into homes, or something else entirely?

Then of course you have the people in this thread who say "Yeah that's a great deal bro! Buy a $300,000 house with 3.5% down and keep your other money in the bank just in case you lose your job, or maybe you don't like the neighbors anymore, or maybe you just get tired of paying the mortgage, then you can walk away easily anyway. At least you had fun in your big house, who cares if your debt becomes part of the collective debt of the entire country when FHA needs a bailout. It's all about you bro!"

This country is financially sick, and will be for a long time. A lot of people blame banks, and deregulation, the FED, but they couldn't have pulled it off without the complicity of people who buy $300,000 homes with 3.5% down. Just sayin'.
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      07-17-2012, 11:52 AM   #70
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Quote:
Originally Posted by MediaArtist View Post
... The real question is, why is the gov't even backing 3.5% down, $729,000 mortgages? Is it to get families into homes, or something else entirely?...
The answer is in bold. Now, we may argue whether homeowners behavior nowadays is different than before and people aren't strongly attached to their homes anymore (and consequently aren't that eager to take care of it and surroundings, contribute to the community, take less appealing jobs, etc. etc.), but the intent is simple: more homeowners.
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      07-17-2012, 01:27 PM   #71
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Quote:
Originally Posted by MediaArtist View Post
As a general rule of consumerist behavior, people tend to get the maximum of what they can afford (or get a loan for). That's why I find it funny that someone will paint a scenario where some clever investor will buy a $300,000 home with 3.5% down, and then apparently take the other money he has an invest it in higher yielding "investments", yeah that's going to happen and I'm sure Tupac and Biggie live in Cuba with Elvis and Michael Jackson.

I fully agree with you as I said previously, people definitely over extend themselves. In this country its rampant, but we can see things changing in other countries as well where there moving from a cash society to credit. Human nature right. I do tend to over estimate peoples "common senses", but for the sake of helping the OP whom should rethink buying a house all together baed on his comments he should know his options.
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      07-17-2012, 02:29 PM   #72
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Is this going to turn into the Suze Orman show. I would like to know If i can afford a $200k home.
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      07-17-2012, 03:01 PM   #73
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Quote:
Originally Posted by xtac View Post
The argument that you shouldn't put 3.5% down because you can default is moot.

There are reasons to put less money down, as there are reason to put more money down. It's a case by case basis.

In order to qualify for the FHA you first need a solid credit report/history as well as decent income. These same people putting 20% down could default as well. Sure data might show that those who have 20% down won't default at a rate of fha borrowers, but that's moot for the topic on hand.

We're now discussing personal investment situation, why buy a house anyway if you want to go there? it's just like the whole rent vs buy.

Yes, I agree many people do overextend themselves, it's human nature, and the practices of the bank didn't help. Greedy is what greedy gets.

OP said he does not have 20%, so I would still ask you to reconsider if what you are doing it right for you, given the homes are only 100k supposedly which is incredibly cheap compared to where most of us live it seems.

I myself don't like the idea of even taking a mortgage out, I'm one of the few who believe if you can't buy the house outright in cash you shouldn't buy it. But peoples have diff needs, and they don't teach these things in school.

Buying a big ass house can feel like a dream, until shit goes bad and you don't even enjoy it. i've seen to many people go through this.

Priorities need to be set up properly, but this is not the topic of discussion however these questions tie in greatly with other aspects of ones financial capabilities.

OP as you see, if you really want us to decide the best course of action for you we need details, employment, income, some background, credit history/scores, buying a house is not a simple thing, finding a house is just the beginning, the steps to buying a house begin with personal fundamentals, and it seems like you didn't ask yourself these questions so we can either stay on topic or simply hijack it with personal finance discussions.

OP here...


Without discloses too much personal info...

I live in a small town, 100k-160k is "average" house prices... and many of my friends have houses in this range. I do not live in a big city, like DC or Philly so lets end that dicussion right there.

Not sure "what" I do really matters, but its in the construction field.

As far as income, I will be starting at 50k... but within a year or 2, could be up to 60+k.

My car is not leased, but I do make payments on it... about 300 bucks a month.

I have good credit. I would have never gotten my car without it. 700-800 range.

I DO NOT have 20% to put down. 20% sounds great.. if I would have it, but I don't and that is just the reality right now.

I do not plan on buying some ridiculous 350k house... I am single, no kids, and am 26...

and I don't plan on buying tomorrow or next week, within maybe the next 6months-1.5 years or so?

I am trying to gather as much info NOW, so I can prepare myself accordingly when the time does come.
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      07-17-2012, 03:42 PM   #74
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Quote:
Originally Posted by AllBlackBimmer View Post
OP here...


Without discloses too much personal info...

I live in a small town, 100k-160k is "average" house prices... and many of my friends have houses in this range. I do not live in a big city, like DC or Philly so lets end that dicussion right there.

Not sure "what" I do really matters, but its in the construction field.

As far as income, I will be starting at 50k... but within a year or 2, could be up to 60+k.

My car is not leased, but I do make payments on it... about 300 bucks a month.

I have good credit. I would have never gotten my car without it. 700-800 range.

I DO NOT have 20% to put down. 20% sounds great.. if I would have it, but I don't and that is just the reality right now.

I do not plan on buying some ridiculous 350k house... I am single, no kids, and am 26...

and I don't plan on buying tomorrow or next week, within maybe the next 6months-1.5 years or so?

I am trying to gather as much info NOW, so I can prepare myself accordingly when the time does come.
IMO, if you don't have 20% liquid, you probably shouldn't be buying a home yet.

Not trying to be rude, but it all comes back to MediaArtists POV, which I agree to. $20k (considering a 100k home) isn't too lofty of a goal. If you have low expenses right now, start putting money away each month.

Forget about 20% as a down payment (which I would recommend), that's besides the point. If I didn't have at least $20k liquid at all times, I would be scared of living in my own home. What happens when the furnace needs to be replaced? What happens when the basement floods? When the roof leaks? When your heating bill is $1000+ a month, and your electric is $200, and phone/internet/tv is $200, and proerty taxes are $xxxx....

The list goes on. You can't consider the down + mortgage + utilities to be your only expenditures. What happens if god forbid you lose your job? How long will you be able to pay your bills on less than 20k?

So basically my advice is prepare to spend more money then you thought. Just make sure its not more money then you can afford.
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      07-18-2012, 06:34 AM   #75
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I mean saving 20k isn't out of the question... I just don't have it now.

People are buying houses other ways than just plopping down 20% of the house cost.

I am not saying either way is right or wrong, I am just being aguementative here to learn as much as I can. And having that much money liquid is debatable...

Im sure everyone on here would love 20 stacks in their bank accounts for emergencies, but I would bet if you polled, you would be surprised at how many don't... and thats on a car forum, where as many stated before, people are "driving 35,000 cars and worried about saving 20,000"...

This being a BMW forum does skew the numbers. I mean, I bet you go to a honda forum and all people talk about would be FHA, people looking to drive 40,000+ cars, obviously are living a little bit above the average... not saying they are wrong for wanting to drive that kind of car, we are all BMW owners
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      07-18-2012, 06:56 AM   #76
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I myself am definitely conflicted.

I am preparing to change duty stations out to California. I know I will be there for at least 6 years. I have also recently commited myself to doing a full 20.

That being said, i feel like I should get a house, because Im tired of giving my housing allowance away to landlords when I could be paying down on a house. I dont have 20% or even close to it at the moment, but then again I have the VA loan benefit. I also know that after 2 or 3 cruises that I could pay the house down enough to be able to safely sell and not get raped if absolutely need be.

The flip side is that I am single. I am in the military, and I deploy. A house takes work to maintain, and I couldnt stand for a house to be sitting vacant for 6 or 7 months at a time (nor would my neighbors I assume)

All in all though I feel like I still should. I am financially stable enough to where I can afford this comfortably. Hell my housing allowance alone is 1800 dollars and non taxed. Thats on top of my Base pay, Sea Pay, Subsistance Pay, and any other special pays I might get while on deployment.

However I feel the point is moot, i just financed a 40k dollar car, and dont really feel that the bank would be jumping at the opportunity to give me a mortgage despite me having a good credit score. Especially 6 months after a car purchase.
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      07-18-2012, 08:05 AM   #77
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Is this going to turn into the Suze Orman show.
I like Clark Howard myself.
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      07-18-2012, 08:33 AM   #78
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in the end. do what is best for you and not your neighbor. Some individuals can get away with FHA's and some just got bad luck and lose their jobs. If Op is serious about homeownership I think he can get away with a house in the low $100s. 30 year loan at the current rates will make his payments lower than renting a one bedroom apt.
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      07-18-2012, 08:37 AM   #79
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I like Clark Howard myself.
Yeah he's a more likable guy. Suze orman and nancy grace is on the same page , I just want to slap those two silly.
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      07-18-2012, 09:12 AM   #80
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in the end. do what is best for you and not your neighbor. Some individuals can get away with FHA's and some just got bad luck and lose their jobs. If Op is serious about homeownership I think he can get away with a house in the low $100s. 30 year loan at the current rates will make his payments lower than renting a one bedroom apt.
Kind of what I am getting at...

I can go rent sure, but with today's market and prices, owning a home can be CHEAPER than renting... not saying that will be my case, but when renting and owning are pretty much a wash (depending on situation), then why not own?

... Like I was saying, I do not have 20% to put down - I mean I COULD save up, but that would take a year or more... and im not against waiting, but there has to be other options.



I guess I should look into FHA a little more... What is so bad about this? ... or not "bad"... but the downsides... so I get more info I can back-track in this thread and re-read peoples comments. I did find out that 2 of my friends have done FHA with seemingly no problems? (I will be making more than them, and they both bought a $110,000 house and a $135,000 house and seem to be doing OK)
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      07-18-2012, 12:00 PM   #81
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Actually you are being dishonest, in the very link I posted earlier in the thread:
http://money.cnn.com/2012/07/09/real...cies/index.htm


... it shows that Fannie/Freddie, and privately held bank mortgage delinquencies are actually dropping (probably because their underwriting standards have become more strict since the economic collapse in 2008). FHA held mortgage delinquencies are rising extremely fast because they allow people to only put down 3.5% on a $300,000 home like YOU are suggesting. Putting down 3.5% on a $300,000 home is insanity. If you can only save up $11,000, you shouldn't be buying a home worth $300,000. The statistics undeniably show that people taking YOUR advice simply don't know what they are doing, and end up in foreclosure.

You can claim otherwise, but the data shows that FHA loaners are increasingly defaulting. FHA is going to implode fairly soon with people who acted on advice like you have given out. It's knuckle-headed, consumerist, garbage, that got many people in trouble from 2002-2008. Simply, some very horrible advice.

How am I being dishonest when I never clicked on your link to begin with? It's not even your research.. It's just a Google-job. And the irony in your point is that the article sites Fannie May and Freddie Mac, which are two lenders who have benefited from gov't bailouts during the entire subprime fiasco. Moreover, that increase in foreclosures that were 90 days or more delinquent soared for the year ending March 31. How are those fuzzy numbers a comprehensive view on the the actual numbers of FHAs backed loans v. MBS loan delinquencies? That simply shows a period of time in which the increase was notable. They also addressed that FHA loans weren't as easy to modify when compared to others.

And if you take into account the demographic of the FHAers, I'd bet many were first time home buyers who didn't understand what they were getting into contract-wise and or chose properties that were destined to lose money. It's way too many variables to account for. Still... 3.5% v 20% down is a myth. If you're going to be paying a mortgage for 30 years, I really don't see the benefit of hemorrhaging your bank account so as to avoid a PMI. Hell, you can pretty much double the value of your home and that's what it'll actually cost you over thirty years. Homes are a liability. Throwing cash at it is a predictable as playing darts. Your point(s) are moot.
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      07-18-2012, 12:18 PM   #82
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How am I being dishonest when I never clicked on your link to begin with?
It doesn't matter if you clicked the link, or not, you simply provided wrong information about the default rates for privately held/Fannie/Freddie traditional loans vs FHA loans, and as of this moment, you're being too childish to admit you were wrong (or uninformed).

Quote:
And if you take into account the demographic of the FHAers, I'd bet many were first time home buyers who didn't understand what they were getting into contract-wise and or chose properties that were destined to lose money.
... and who do you think uses FHA?

Investors certainly don't.

Regardless, your advice was simply horrible.
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      07-18-2012, 12:31 PM   #83
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It doesn't matter if you clicked the link, or not, you simply provided wrong information about the default rates for privately held/Fannie/Freddie traditional loans vs FHA loans, and as of this moment, you're being too childish to admit you were wrong (or uninformed).


... and who do you think uses FHA?

Investors certainly don't.

Regardless, your advice was simply horrible.
There are nearly 3 million homes behind in their mortgage and about 13 million home loans are underwater. So, if any of us believe the nonsense you spew based off of ONE google-hack-job...you'd have us all believe many of those are FHA-backed people and that one of the causes may be the 3.5% down. Causes of foreclosures is a broad subject. LMAO! The housing crisis is all over the place as far as demographics goes. You pinpointed a flaw with FHA loans but failed to address the rate of foreclosures for none-FHA loans or at the very least, the total number. What gives there? Again, your article cited a period where the increase was notable. That's it. I owe you no apology nor will you ever get one from me, since you want to make this personal even when all you managed to do was give BS advice based off of ideal circumstances and a cut & paste job.

Sure, keep promoting the idea that one should release their lifesavings into a house that is already not worth what they'll pay for it and leave nothing in the bank for emergencies, like job loss which is arguably a main reason for those who are behind on their mortgages. Stupidity 101. Thanks for playing.
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      07-18-2012, 12:53 PM   #84
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I think the discussion is getting too macro about financing and collateral backed financing for the OP's question.

OP, good for you for considering home ownership. I am a real estate attorney and have closed all types of properties for over a decade and have my salesperson's license. There is a lot of good advice in these posts, I will try to add some general points to your evaluation:

1. Get preapproved before you look at anything. If you have good credit or above, go directly to a lender that has a retail department (Wells Fargo, BofA, Chase, etc.), you will not need a mortgage broker to search on a secondary market and likely will have less closing costs. This will be the maximum amount you will get approved to borrow, not necessarily what you expect to borrow.
2. Forget about what you could possibly afford and focus on what you feel comfortably paying per month over your expected investment time, which may or may not be the maximum amount. Make sure you add into that equation monthly insurance and taxes, maintenance (landscaping, cleaning, utilities which you may not be paying now) and reserves (roof, paving, painting, HVAC, Plumbing), which you are most likely not doing now.
3. Think about your exit strategy and approach the house as an investment. From your description, this is likely a 3 to 5 year investment so plan accordingly. In this time period, you are likely not going to do major repairs, but you may if something is falling apart.
4. Choose a few zip codes in which you want to live and focus on learning the market prices within those areas. A good resource is Realtor.com, or the county online records (i.e., in Miami-Dade, there is a "My Neighborhood" search function on the county's property appraiser website that will tell you recent sales prices and square footages, bedroom/bathroom statistics for the properties).
5. See a lot of houses. You will be surprised the differences for similar prices. Every property is unique and nothing will be perfect. Think about what you like and don't like about the property; these will be the things your future buyers will be considering if you don't change it. Think about what floor plan you want. Like some posters advised, you can change a lot of things but the foundation and floor plan should hopefully not be on the list because of the cost. From your description, I would be looking in areas that are "starter home" areas where there are a lot of other first time buyers and turnover to families moving up. These areas should give you a good resale market when you decide to move.
6. When you put in an offer, most contracts are standardized. If you decide to retain a realtor, even if he/she is your realtor the Seller most likely will be paying the commission (your realtor will be a cooperating broker, paid a split from the seller). Most broker contract forms are sufficient for a standard residential purchase.
7. Definitely do an inspection, even if it is only a condo and you are making sure the appliances work. You want to make sure there are no major issues. For example, in Miami, many houses are on septic and many Sellers do not know it (i.e. have never maintained the tank). Rebuilding a ruined septic/tank and drainfield can be $10,000+ and the house is not liveable during the repairs.
8. In this market, there is a good chance the house you like is being sold as a shortsale. This just means it is a regular sale, but the lender(s) must agree to take a payoff in an amount less than the balance due on the loan. However, in the approval process, you will need to sign a deal with the Seller and wait for the Seller's lender(s) to approve the sale. Make sure you have a contingency for your ability to terminate the agreement if the approval is taking too long (i.e., from execution of the agreement, 60 days for Seller's lender approval to be given or Buyer has a right, personal to Buyer, to terminate or allow for another 60 days for approval). Once the lender(s) approve the shortsale, the transaction will move very quickly from there, so you must be in continuous contact with your purchasing lender as not to get behind on their closing preparations.
9. Get title insurance. If you use an institutional lender, they will require it to the amount of their loan. The process will verify Seller has the ability to sell and that there are no code violations, assessments, taxes or other amounts unpaid from your purchase.

Good luck!
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      07-18-2012, 01:55 PM   #85
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I owe you no apology nor will you ever get one from me, since you want to make this personal even when all you managed to do was give BS advice based off of ideal circumstances and a cut & paste job.*

Sure, keep promoting the idea that one should release their lifesavings into a house that is already not worth what they'll pay for it and leave nothing in the bank for emergencies, like job loss which is arguably a main reason for those who are behind on their mortgages.
I never suggested that, again you are being dishonest.

Also, I don't need an apology. I think it's pretty clear who was being dishonest when you claimed:
"the increase in FHA delinquencies is on par with the rate of increase in delinquencies with conventional loans. Lol. "

So you can stand there and laugh, but people are smart, and can see who is pushing BS, and who isn't.

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you'd have us all believe many of those are FHA-backed people and that one of the causes may be the 3.5% down
Yup, because it's simply the truth, and the statistics show it. Your opinion notwithstanding.
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      07-18-2012, 02:06 PM   #86
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MiamiE93Vert gives great advice.

I'd like to add a little to #7 on his list though.

When I write up a purchase agreement for a buyer for a non-distressed property, I always ask for the seller to pay for inspections and appraisals. They've set the price and advertised it as a great property, so back that up with a professional appraisal/inspection.

You don't want to be in a position where you are out of pocket because you've paid for an appraisal or inspection and the house comes back with a lower value than you offered or there is something seriously wrong with it.
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      07-18-2012, 03:01 PM   #87
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I never suggested that, again you are being dishonest.
You quoting one source as filler to your already weak point does not make me dishonest even if my opinion doesn't agree with it. I think you're being difficult and want to argue semantics after you see how foolish it sounds to put 20% down on a liability like a home in this economy. The entire spirit of this thread agrees there should be a happy-medium when purchasing nowadays. You're an outlier. A foolish one at that....

Quote:
Also, I don't need an apology. I think it's pretty clear who was being dishonest when you claimed:
"the increase in FHA delinquencies is on par with the rate of increase in delinquencies with conventional loans. Lol. "
And I further supported that comment by asking you to provide numbers showing, amongst the millions of foreclosures in the US since the sub-prime meltdown, how are these delinquencies separated by loan type? You didn't.


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So you can stand there and laugh, but people are smart, and can see who is pushing BS, and who isn't.
Yes they can, and several people already called into question your unwarranted attack on my advice which ultimately is geared toward protecting the homeowner him/herself and not the bank per se. Money in the bank is your insurance. PMI, the banks. This isn't that difficult a topic for most but, I see you get very emotional when your point has holes in it.

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Yup, because it's simply the truth, and the statistics show it. Your opinion notwithstanding.

The statistics gives you a topographical explaining, which for simple minds, can look well.....simple. A smarter person knows there is a stream of McMansions in foreclosures across the country. Exclusive zip codes, middle class and upper-middle class areas are underwater, and certainly those places aren't accessible to the people you reference. LOL!
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      07-18-2012, 03:06 PM   #88
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I think you're being difficult and want to argue semantics after you see how foolish it sounds to put 20% down on a liability like a home in this economy.
Again, you're being dishonest. My first post in this thread was that I didn't think it was a great time to buy.

Can you be honest for once in your life or at least read the thread before you make a long, two page, reply?

Seriously, just casually browse and read the thread, do some basic fact checking, then take a breath or two, then reply. I think it would help the flow of this conversation a bit more. For instance you would have known that FHA delinquencies are outpacing Fannie/Freddie/Conventional delinquencies recently, but you didn't even bother to do basic "google" research.

Regardless, I think the general advice you've given is horrible given numerous stats that I've covered. You do bring up some debatable points (for instance having "enough" cash reserves, how much to finance, etc), but under a faulty premise, and line of logic, none of which is based on sound economic fundamentals. Let's both hope people don't listen to you, for the sake of our countries economic health.
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