#10 – You may lose your job. When you don’t pay your rent, they put you on the street in 20 days. When you don’t pay your mortgage payment, they don’t put you on the street for at least 8 months.#8 – Many a marriage has been saved…by buying a house with two staircases.
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#7 – You just read *page 114* of Harlan Coben’s “Promise Me” (see below), and you live in a “garden apartment”.
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#6 – Your girlfriend is demanding equal treatment to your wife.
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#5 – Your boyfriend is demanding equal treatment to your wife.
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#4 – Your mother-in-law just bought a 1 way ticket to your apartment
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#3 – Your bank account is bigger than your home office
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#2 – God said: Your real estate agent, banker and mortgage rep all need you to buy a house, right NOW!. This is a direct message from God. No kidding.
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NUMBER ONE: Your 4 year old is riding the dog, and dragging the baby around like a pull toy, because she needs a yard and swing set.
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*Page 114* “lived alone in the same crappy “garden” apartment for more than a decade…they call them “garden” though the only thing that seemed to grow was the monotonous red brick…sturdy structures with the personality of prison cells, way stations for people on their way up or down and for a few, stuck in a certain personal-life purgatory.”
Very good points Ardell.
I just have one addition.
“#11: Less competition
In a weakened economy there are less real-estate buyers. Therefore, the sellers are more desperate. Do you not have enough capital to pony up for a mansion??? I suggest some creative bargaining. Business is business.”
Keep it up the great work Ardell.
-Scott Summit
DBNR
Oh God, Scott. Get that “I’m rich; your’re not” banner off your site. Sheesh!
Yes Ardell, the banner is a little bit confrontational. But hey, he’s not lying! He’s rich and he is paying Scott Summit!
I would also suggest bartering in the real-estate market too.
Scott,
I think you missed the part where this was a joke. Your Twitter comment to me “you just need to find the right cheat codes.” has really ticked me off. Sorry, for engaging in discussion with you. I didn’t expect to find someone who believes cheating is the way to beat the system.
We are entrenched in a national crisis largely due to people who had your mantra. I seriously suggest you not comment here, and I have stopped following you and blocked you on Twitter as well.
I appreciate your honesty, but not your mode of operandi.
Ciao!
The market is about to change. Like other parts of the market, up or down, it is very hard to time the absolute bottom. With real estate we don’t have to hit the very last penny or the very best interst rate, we are lucky if we get close. The one thing that will go away fast and would be a real shame to miss is a quality home . Those will get snapped up first and quick, we are already seeing many offers come in on the best listings. Every buyer is looking for a DEAL, but if you get a great price on a crummy house it’s just not a good deal at all. It must be all three things to really be a DEAL. 1. start with a great home and property. 2. we have great historically low pricing right now. 3. ther is all time amazing financing available for purchasing right now. The lender issues are on business loans and speculative development and construction loans, not on purchases. So get out there if you want a new home in 2009 and buy one sooner rather than later. If you wait too long you will be looking at the picked over properties not the good ones.
art…..
Art,
It doesn’t appear that you are in the Seattle Area, as that is not true here.
Ardell, re: comment #4. You are so totally HOT. Whew!
Scotsman,
This whole Seth Godin Tribes thing has gone to my head. I keep finding myself saying “not in my Tribe!” and voting people off the isand. LOL
When I first read this posting yesterday, I was thinking “I wonder how many people are going to take it seriously” – so sad that it happened so quickly. Next I’m waiting for the Times or PI to pick it up and not realize that it is a parody piece.
Great post overall Ardell!
Gene
Gene,
I threw Letterman in the corner to show which kind of “Top 10” it is. Perhaps people who get it via RSS feed can’t see the picture? One would think, even if they didn’t get it at first, that #2 would be a huge tipoff 🙂
Thanks for the props.
And to be sure the people who don’t get that the list is a joke I’ll add this to #10:
“When you don’t pay your rent, they put you on the street in 20 days. When you don’t pay your mortgage payment, they don’t put you on the street for at least 8 months.”
The downpayment you need to buy a home should cover at least a good 24 months of rent so by renting you can last 24m when you loose your job compared to 8 months until you are foreclosed upon if you spend the bucks on buying.
tj, that really is discounting the availability of FHA, VA and other non 20% down programs. We don’t want to spread fear, based on erroneous “facts”.
I don’t think anyone wants to spread an erroneous presumption that everyone needs a huge downpayment. It is not the case, nor would HUD allow home ownership in this County to hinge primarily or entirely on eveyrone needing 20% down.
Everyone is tweaking and re-educating. If you truly believe that everyone needs 20% down to buy a house, then you need to re-educate yourself. It is quite possible that what you personally want to buy meets that requirement, but it is clearly not true for most people.
I wasn’t thinking 20% down. A common rent is $1500. 24 x 1500 = $36k. If that is used for 20% down you get a home price of $180k, less than half the median in KC. It’s 10% on a $360k home. My guess is that 10% down is a pretty common requirement these days? I had no intention of creating fear, just pointing to the fact that the downpayment you spend on buying a home will cover a longer time of rent than 8 months making point #10 the true joke I think you intended it to be.
I know you were tj, but I have a responsibility to the public to not permit you to represent that is the case for all people in this Country. It clearly is not.
There is still a system in play that requires about the same to rent as to buy with regard to upfront cash outlay. Please don’t discount it.
Rent usually wants first, last and security deposit.
Purchase wants 3% or so with seller paying the closing costs.
If you are going to do the math…don’t only do it from your personal mindset. People reading will get the wrong idea.
VA needs NO downpayment.
I don’t want to see a world again where the Average Joe thinks he can’t buy a house. That is not a good thing. Please don’t perpetuate that myth here.
Nor do we want a world without downpayments do we 🙂 It kind of got us into a bit of a mess, no?
Veterans have enjoyed zero downpayment loans for…likely longer than you have been on this earth 🙂 FHA is a program that has been around for nearly or equally as long.
Don’t confuse the recent abuse of zero down to justify only 20% down. That is NOT where we want the world to go…or where we want this Country to go. Where “the haves” own, and the “have nots” can only rent from the haves. I think that went away with feudalism and slavery.
Very off-topic and I’m not sure why you turned the comments in this direction but personally I think a 20% down requirment is a good idea. We talked about it before and you an me disagree about the glory of debt and the use of credit but I don’t have a problem with VA. Those guys and gals deserve special treatment. I’m worried about FHA and that it could cause more costs for tax payers. But as you also know the real issue I have is home prices. If they were sane none of the down payment options would really be a problem. And I’m absolutely positively sure that continue to rent is better than buying if you think you are at risk to loose your job. 100% sure.
tj,
Recent events outside of this post have driven home the point that because of the high volume of readers of RCG, and its high ranking in Google, we have a broader duty to not spread mis-information.
When I started in real estate I met many people who thought they were not eligible for VA, but were, and lived most of their lives without owning a home as a result.
It is important that we not spread “the word” that leads people to believe that they cannot own a home. It simply is not true. It may be your preference for yourself…but not true for people at large.
Mis-perceptions spread quickly and affect people’s lives. You may think “for the better”, but that is not for you or me to decide. People do not need a lot of money to own a home. Some don’t need any downpayment, some need a small downpayment, and options for both of these exist in the immediate area.
There is a force afoot to reduce prices, so that they can buy for less. That movement is to some extent creating a false perception. Not saying you are part of it. Just making sure we are not contributing to it.
I’m sure that there are any number of programs that will allow people to buy with zero down. But I have to wonder: If a person cannot put together enough money for a 5-20% downpayment, then how on earth are they going to deal with any situation where their mortgage or other expenses go up, or their income goes down? By allowing such people to “own” homes, we’re setting them up for failure when any unforeseen event (lay-off, illness, a baby) happens to them.
I would suggest that people not buy a house without knowing that they have enough of a cushion in the bank to last them at least several months after the transaction has been completed. They should be able to put down a 10-20% downpayment, even if they eventually opt for a loan that doesn’t require it.
In fact, personally, I wouldn’t attempt any transaction that would leave me with less than three years’ worth of liquid reserves. But I’m just a very fiscally conservative person.
Sampai, I believe loan programs do require certain reserves on top of the down payment. From what I know, they are inadequate, but they exist.
Just to follow up on what you said, what amazes me is that someone can go from an extremely low living cost situation (e.g. room sharing or living with parents) to home ownership, without the lender batting an eye and asking: “If you were living so cheap, why don’t you have more money? And if you didn’t save money before, why do you think you can pay more money now?”
That said, not everyone WANTS to put more than 3.5% down. They have other things they want to do with the money, or just want to hold it in savings.
Yeah, if I could get away with a 3% downpayment, I would too. But I’d still want to make sure I had plenty of money in reserve.
Maybe we need new loan programs where the downpayment is small and the interest rate is low, but you’re required to show a history of strong savings and liquid assets to qualify. I would have jumped at that when making my purchase… The default rate on such loans would probably be far lower than the norm.
“I’m sure that there are any number of programs that will allow people to buy with zero down”
VA is the only one I know about, except FHA allows the downayment to be a gift…still a downpayment, but 3.5% or so
“I believe loan programs do require certain reserves on top of the down payment. ”
Usually just enough to pay the first payment or two.
sampai,
The low downpayment FHA program has been around for many, many years. It is government insured to encourage home ownership and the buyer pays a mortgage insurance premium as part of the loan.
Perhaps they expect a certain % of default, but the point is the 90% or more who would not otherwise be able to own homes, who do not default.
Sampai wrote: “Maybe we need new loan programs where the downpayment is small and the interest rate is low, but you’re required to show a history of strong savings and liquid assets to qualify. I would have jumped at that when making my purchase… The default rate on such loans would probably be far lower than the norm.”
They probably would be. In the past I’ve said that credit scores are a really lousy basis for making a home loan. Just an example of that, if you had someone with $50,000 in the bank, no debt (including no car loans, etc.), they probably would have a harder time getting a loan than someone with a car loan and $20,000 of credit card debt and $10,000 of savings.
Good morning all,
FHA does not require reserved for a single fam or duplex. Reserves are required if the homeower (remember all FHA loans are owner occ with some minor exceptions) is purchasing a triplex or fourplex.
A lender might come along and ask for reserves but FHA (which isn’t a lender, just an insurance program) does not.
Sampai the program you’re describing IS available through state bond money programs. The homebuyer typically has to go to a class or workshop first and there are other stipulations.
Kary is making a good observation in comment 20 regarding payment shock. FHA DOES look at the amount paid in rent, and compares that to the mortgage payment, Principal, Interest, Taxes AND Insurance. If payment shock is high, then the FHA underwriter will look for evidence that the homeowner has a history of savings on top of that rent payment.
With the lax underwriting guidelines of the bubble run up days, this was all cast aside. BUT not with FHA. That’s why many lenders reverted to subprime underwriting standards.
FHA standards didn’t change.
Jillayne, the automated underwriting system (DU) may require reserves on an FHA transaction depending on the strength of the entire file.
Rhonda,
Does money in a 401(k) still qualify for the reserve requirement? It’s been a long time, and while Jillayne may be correct that the reserve requirement is not FHA induced, I’ve yet to see a lender who doesn’t want to see at least the first month’s payment in reserves at closing, as well they should.
Ardell: “VA is the only one I know about [which allows zero downpayment], except FHA allows the downayment to be a gift…still a downpayment, but 3.5% or so.”
The flippers who used to own my condo bought it with a 80-20 piggyback mortgage. Basically a creative way to put zero down. Both lenders ended up taking a big bath, because they didn’t see that as a red flag in the first place.
Ardell, when we submit loans via our “automated underwriting” for FHA, if the file has any weakness, the computer response may very likely require reserves. It is possible to receive a
401k and retirement funds are calculated a 60% towards reserves (conventional factors 70% of the last value of the most recent statement for retirement accounts).
Wow, quite the conversation going on in the comments. Great top 10 though.
sampai
#29 “used to” is no longer.
Vernal #31
Yeah, hard to crack a joke around here 🙂 We try to “lighten up” once in a while…but these are serious times, and at heart we are all serious people here.
Rhonda,
Thought you’d get a kick out of this. I just got an email saying “rate update”. I opened and scanned it and didn’t see any numbers, just words.
I looked more closely and here is the rate update portion of the email: “Rates are still very low and looking great.” LOL!!! Thanks for nothing came to mind.
That’s funny! My head is hurting today after quoting extremely low rates only to have folks want them lower. “4.5% is the new 5”.
I needed the laugh, Ardell! 🙂
I’m thinking my opening remarks on all my listings will be “Got 4.5%?” Seriously…no kidding.
For that rate, you need to have a 60% or lower LTV, 740 or higher credit score, loan amount $300-$417k and hop on one leg in a circle three times (okay…I’m joking about the hopping). I better add that the apr is 4.629.
It will be interesting to see what my rate post will look like on Friday.
That’s why I’m thinking the seller CAN buy it down to 4.5% for some…but not all. So Got 4.5%? Is the best I can come up with to raise the topic.
They sure can! It would depend on the mid-low credit score of the buyer and how much the buyer is using for down payment as to how much the seller can contribute towards closing costs.
PS Ardell, I’ve been quoting low 5’s for FHA loans today.
Rhonda,
If FHA were at 5%, how many points would it take to buy that down to 4.5%? Ballpark?
Ardell, ballpark–around 2.75% points based on a quick glance on some rate sheets from this afternoon. (Tomorrow morning, when markets reopen, this may or may not be available–so this is not a rate quote).
The seller can contribute up to 6% of the sales price towards actual closing costs with FHA as long as the buyer meets the 3.5% minimum required investment (the seller cannot pay that).
That’s a little steep. Maybe buy an FHA down to the conventional rate and the conventional rate down to 4.5%?