Comments on: “Putting Your Personality Online”

By: ARDELL

ARDELL — Fri, 09 Mar 2007 06:44:24 +0000

Rhonda, The audio came up today. Here's the link for Inman Subscribers.

By: Rhonda Porter

Rhonda Porter — Thu, 08 Mar 2007 21:22:02 +0000

Bill, When I have some extra time, I’ll review my database to see. Your figures sound pretty good…maybe closer to 40%. When people move into a home, they often don’t realize what expenses may pop up on them…so I do like to see borrowers have extra $$ in the bank vs. plopping it all into the house. There is a cost to extracting the equity later.

By: Bill Waters

Bill Waters — Thu, 08 Mar 2007 18:49:38 +0000

Rhonda, I’d guess that 30-40% percent of zero down buyers are subprime. What’s your estimate?

I agree that if you only have a few % to put down, you’re probably better off holding on to it.

By: Rhonda Porter

Rhonda Porter — Thu, 08 Mar 2007 14:30:30 +0000

Not all of my zero down clients are subprime. Many have 5% or more down, and elect to go zero down to keep what would have been the down payment liquid. Plus, some may want to have the higher mortgage balance to create a larger tax deduction benefit.

Dustin–great add with the comments update!

By: ARDELL

ARDELL — Thu, 08 Mar 2007 08:20:21 +0000

Given Bill’s latest question I did July, same area, same price range. 83% financed with only 10% zero down. High appreciation area; appreciation not funded by zero down loans.

So far my perception is matching reality. Highest appreciation areas do not have the highest zero down loans. I’m using a $400,000 to $600,000 price range, so these are not “well heeled” consumers.

Looks like the world is not “going to hell in a handbasket”

By: ARDELL

ARDELL — Thu, 08 Mar 2007 07:53:57 +0000

Tax records are not updated for Feb 07 yet, but I ran Redmond – $400,000 to $600,000, single family and condos, sold in Jan 07 and came up with 81.1% financed. Only one sale was zero down. Not exactly “wealthy individuals”.

Just people who likely had equity in their lower priced condo, and then traded up bringing their equity into the new purchase. A few may have rented and saved, but by and large people who buy a little condo or townhome, before they are ready to purchase a home, have some equity to trade up with.

By: Bill Waters

Bill Waters — Thu, 08 Mar 2007 07:41:13 +0000

Tim, I’m interested in hearing how the loan mix changes due to lenders tightening standards in the past 2 months. My impression is that the tightening hasn’t had any impact, with the exception that a handful of subprime borrowers have been disqualified.

By: Bill Waters

Bill Waters — Thu, 08 Mar 2007 07:33:14 +0000

Ardell, I totally agree that experienced investors can net more than the mortgage interest on their loans. Another one of my escrow friends works at a firm that caters to high end borrowers, and yes, even if they are buying 0 down, they have other assets that could be liquidated for a down payment, and that’s irrelevant in their purchase, because that is their choice.

Experienced investors with good credit have alot of options available. Interest rates under 6% encourage this.

Still, the question is whether this represents the overall market. As far as I can tell, these wealthy individuals make up *some* portion of the market, but unless you can figure out how influential (by market share) they are, it’s hard to say what the impact is. I’d guess they represent less than 10% of homes sold zero down. Definitely a market driver, but not a big player in price appreciation.

I think that nation wide and locally most 0-down borrowers are first time buyers. Maybe not in prime areas of bellevue and kirkland, but for the puget sound area as a whole.

By: Tim

Tim — Thu, 08 Mar 2007 07:24:30 +0000

Every one of the 2007 YTD 100% financed transactions I mention in post #28 were originated with sub-prime lenders and sub-prime terms (ie, higher interest rates & terms consistent with sub-prime loan products: 1yr ARMS, I/O , PPP’s, etc…)

Some of the sub-prime lenders funding these loans: First Franklin, Argent, New Century (prior to their recent problems), Wells Fargo (sub-prime), etc….

By: ARDELL

ARDELL — Thu, 08 Mar 2007 05:44:57 +0000

FYI, I have had people with enough money to buy cash and incomes well over the amount needed to afford the purchase, use zero down stacked costs.

Just because the loan is zero down stacked costs, doesn’t mean someone doesn’t have $400,000 in a 401k and other investments. I’ve seen that a lot.

Some people do that rather than sell their investments, and feel current interest rates warrant financing it all.