Quote:
Originally Posted by Nietzsche13
What the banks are doing is raising the down payment requirement. The days of no money down are gone forever. You will need 20% for now on plus great credit. In commercial lending, the borrower will be responsible for guaranteeing new loans with additional collateral on top of the property itself.
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This isn't entirely true. Freddie Mac is still giving mortgages with only 5% down. National City and Wells Fargo are still doing mortgages with only 3% down. The Genesis Program (FHA with 3% down paid by seller) just ended on September 30.
From working in the industry, I can tell you the biggest problem isn't the lack of down payment. The lack of down payment required is definitely a problem, but it's the overextending of credit compared to income. Let's say Joe Blow was approved for a zero down 200k loan in which he was foreclosed on. If the banks have the same guidelines with the only difference requiring a 20% down payment, Joe Blow will go out and buy a 250k house with 50k down and still be foreclosed on. If your mortgage payment is more than 25%-33% of NET monthly income, you are running a major risk IMO.
Also, the "tightening up" when it comes to credit scores isn't here yet. We just received an order for someone who declared bankruptcy in 2005 who is getting a purchase money mortgage. We've also recently received orders where the buyers have judgments that will not be paid off at closing and attach to the property once the deed is recorded. It's flat out ridiculous.