WaPo article
I work as a large commercial lender for a bank. This is such a bad idea.

 

Lets recreate the bubble that just burst.

Don't trip, my boy Obama got dat Obama money to bail us out dawgg

 

 

F-it. Do it. Seriously. Make homes cheaper for me to buy then sell for profit!

 

repost:

https://www.miataturbo.net/current-e...08/#post997020

 

It's too bad there is no previous experience with this kind of thing to know how it will work out.

 

brb guys bout to start cc ballin

 

Does it sound stupid? Yes.


Did I get turned down for <$100k loans with a >700 credit rating? Also yes.

 

do you have collateral?

 

Does anyone buying their first house?

 

why would you take out a personal loan to buy a house?

 

In the short term, this will make homes *more* expensive.

In the long term, this will cause the bottom to fall out of the housing market AGAIN, before slowly beginning to return to equilibrium.

So your plan is not to wait until creditors start giving loans to errebody and buy a bunch of houses - your plan is to start saving money now, Sell your house for much profit just before the housing market peaks, then rent for 3 years as loans default, the housing market falls to pieces, and prices drop through the floor - then buy the **** out of some short sales and foreclosures with cash and rent them for 5 years until the market comes back around.

 

"The house" is collateral.....

"The large down payment" or "PMI" is insurance against a decline in value of the collateral

"Homeowners insurance" is insurance against catastrophic damage to the banks collateral

An "Escrow account" is insurance against you being a dumbass and not paying up your Homeowner's Insurance premiums or property tax.

 

Ah, I thought he meant something other than "the house".

And yeah I had cash for a 15% down payment. Still needed help from a non-profit that helps people with bad credit to even get pre-approved.

Hell I didn't even have a choice with the house I bought. I HAD to buy it cash because nobody would even talk to me about a loan for a $40k house. I could walk up to any car dealership in the country and walk away with a $40k car.

 

There's a lot more to the picture than a simple credit score. Credit scores do not equate to or solely dictate the credit worthiness of a given transaction or loan. Credit scores are backwards looking evaluations of a person's borrowing habits and repayment fidelity.

Loans, and especially in more recent times mortgage loans, are determined based on the value of collateral, amount of downpayment, cushion on the Borrower's ability to service debt, and the given bank's existing portfolio weight and condition of similar type loans. A lot of banks got burned and are still being dragged down by underwater or fully defaulted mortgage portfolios. This makes them very reluctant to make anything but the very safest mortgage loans in the current market.

A local mortgage broker can put his or her finger on the banks in your area that would be willing to do a consumer mortgage loan with your credit metrics.

 

this is what FHA is for.

 

I am actually getting charged an extra .25 interest for my mortgage loan being under 100k. Their reason for that is because they will make less money off interest on the house.

 

Yep, some banks do that. It's a backwards economy of scale. They incur the same fixed cost for each mortgage regardless of the size. Inefficient/top heavy banks can't maintain their return on assets unless they juice the interest rate on smaller loans...

 

Zombie bank problems.



Kidding aside, your points are very valid (which you would expect given your background).

 

I heard an ad a few days ago, "Refinance your house for up to 150% of the value!" It's like the government is trying to get us right back into the same situation we've been trying to dig ourselves out of the last ~5 years. I guess I should jump on the opportunity to snag the $200k and never make a payment on it.