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if you have the income coming in to pay it off then why not
It can happen again. But you see, a lender looks at you as having no motivation to stick with paying your monthly mortgage if things go sour for you if you have no equity in the home.
During good times when in some places like Las Vegas where homes were going up in value 10% a month you didnt need to have your own sweat and blood equity in the home. The banks saw little risk in zero down.
It might be a long long time before zero downs are available again. But time heals and humans forget. If homes ever appreciate in value again, then mortgage programs will change with the times.
I dont want to agree with you but unfortunately you are right on the nose. Once this depression fades it will indeed be business as usual. Greed and corruption is in our culture. It will never die.
I don't think it will be as bad as it was, but I don't think it will be a 20% down requirement. I have a couple people I know that work in the car industry. Loans are still WIDELY available. The only difference is that the people who shouldn't get loans, AREN'T getting them. Tons of car dealerships are supposedly going under also. From what I was told, it is the most in history (Im pretty sure that was what they said). The fact is though the only reason these dealerships were there was because of s--t loans. Same goes for a lot in the mortgage industry also.
The strong companies will remain and they will continue to loan money to those they feel qualified. It won't be as easy as it used to be, but it won't be a 20% down or nothing situation. That's just my opinion though.
I think going back to the 5/7 Rule would help too. Prior to the early 1980s, all creditors used the 5/7 Rule, which was 5 years at the same job 7 years at the same address or 7 years at the same job 5 years at the same address, plus a listed phone number. Without that, you didn't get credit.
Interesting, but I think unduly harsh. If those rules were truly adhered to, I would NEVER have credit of any sort. A 3/3 rule is more realistic and reasonable (in addition to all the other rules).
What about adhering to the 28/36 rule? PITI+HOA+PMI cannot exceed 28% of average gross monthly income (but accomodate bonus and overtime income which at my company can make up 20-30% of an employee's income) and home costs + all other debt cannot exceed 36% of income.
My home-buying plans are long gone right now. I'll have 10% + closing costs saved by next May (about $21,000 total) but that would just about clean me out until I built up reserves further. If interest rates rise, if house prices rise, if they require 12 months of reserves in the bank (and 401K is not considered), if they require 20% down, etc. then my 806 FICO score and $21K won't be worth much. I'll end up signing another twelve month lease and hoping rates and prices don't rise yet again, and I'll still only be at maybe $35,000 saved.
$135,000 house with 20% down and 12 months of reserves = about $56,000 required to walk in the front door. Sounds like it will take another 37 months of saving. I guess I really will meet the 5/7 rule at that...
It's going to depend very much on the individual market. I'm pretty confident the age of zero down easy mortgages from the large national banks is over. They're just not going to take the risk when they don't know individual markets that well.
Some areas of this country will continue to be relatively immune from housing shocks. Local banks that are financially sound there might very well give qualified borrowers very attractive mortgages.
In short, the general rule will probably be that lending will be a lot tighter, much more subjective, and locally based. Just as it should be.
In short, the general rule will probably be that lending will be a lot tighter, much more subjective, and locally based. Just as it should be.
Along with the rest of your post, there is a sensible statement. Unlike the absolutes people seem to be posting as if they were now facts or truths and "just the way it is now"... Thank you.
Along with the rest of your post, there is a sensible statement. Unlike the absolutes people seem to be posting as if they were now facts or truths and "just the way it is now"... Thank you.
Well, the title of the thread is "what do you THINK future requirements will be..." So speculation is expected, don't you think? It's implied without even qualifying it with the words "I think" in front of ever sentence.
I was really surprised to learn just how much they laxed the rules when the subprime bust hit the papers. Basically, if you could open the door and walk into their office and BAM..you got a mortgage.
Ok..maybe not that lax
Actually, that's not too far from the truth. It was like "hi, if you open a bank account with us you'll automatically be approved for a home loan!" as if it were a toaster.
Sad thing is, I saw that when I walked into a WaMu with my friend when she was depositing her check (it was something along the lines of "open up both today"). I thought to myself "this canNOT be sustainable economically. And, I was right. Not that that is saying much... W predicted this, as well, if that tells you how common sense it was!
I think going back to the 5/7 Rule would help too. Prior to the early 1980s, all creditors used the 5/7 Rule, which was 5 years at the same job 7 years at the same address or 7 years at the same job 5 years at the same address, plus a listed phone number.
That was good back then, but I don't know how well it would work today for these reasons:
1. People change jobs today because advancement in the same company stops after a while. Many people change after 4 years. We're not in our parents' generation where you stay with the same company until you croke or retire. The address thing might work, though. Also, in many industries today, it's impossible to stay employed for a lifetime even if you wanted to, because alot of it is contract work. My field, computing, for example, hires many people for contract work and then you move on. However, most usually secure another contract before moving on, and still get a salary they can divvy up for living expenses if they don't.
2. Many don't have a LISTED phone number because they use cellphones as their only line (that's what I do)
I think that modifying this rule for today's world would be a good thing, though. For example, instead of 5 yrs at the SAME company, prove that you have "smooth transitions" between jobs, proving you're not getting fired, quitting, or anything like that, and that it was just time to move on due to advancement or end of contracts.
Now, I would say I'm not a fan of the 5 year address thing, but at the same time, I can see a need for it. Basically, if you can't settle in a rental for 5 years, what's to say you will stay put in a mortgaged property for equally as long or longer (especially if it goes down in value, like it is now).
Yup..Texas so far has weathered this housing bust rather well.
Same in Atlanta. In fact, demand is up because people from South FL, SoCal, NYC, Boston, Nevada are abandoning their homes and coming here en masse. The South FL area has shrunk a bit in population since the bust, but here, population increases continue to be 150-160K per YEAR. It's crazy. We did have a slight price dip in 2006-2007 of about 4%, but it was nothing compared to the other areas sucked into this mess (and it was caused by an excess supply of homes, which we have slowed down on building). Now, prices are stable and rising at a steady rate like they have been.
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