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If you had $300,000 in the bank, would you loan it out to some Joe for a measly 3.25% interest? I sure wouldn't, even if God himself[1] appeared in a fire next

If you had $300,000 in the bank, would you loan it out to some Joe for a measly 3.25% interest? I sure wouldn't, even if God himself[1] appeared in a fire next to me and guaranteed this loan. There's better ways to spend your money. The only reason the banks accept such a piddling sum is because they immediately sell the loan to a government-run corporation(or maybe skim the interest for a year or two). In the 1800s before the government stepped in, you had to put 50% down, your interest rates were more like 11%, and while the loan was amortized over 30 years it ended after 5 years, so you'd have a 25-years balloon payment at the end. That's about what it would take for me to consider that loan worth it. The modern term for a loan that isn't sold to the government is a 'portfolio loan', and some smaller banks or hard money lenders will give it to you. Expect 1800s-style loan terms for an 1800s-style loan. The only time I'd loan money out at 3.25% if I were expecting you to default, and wanted to get your 20% down payment for free when I foreclosed as the noteholder. [1] Okay, I might actually take it in that case. But not because it's a good deal on paper.

no_flags 10y ago
"The only reason the banks accept such a piddling sum is because they immediately sell the loan to a government-run corporation(or maybe skim the interest for a year or two)." Being ignorant of the situation, I went to fact check this statement and was blown away by how true it is. I'm flabbergasted at the amount of involvement the US government has in the mortage market. More reading if anyone is interested: 1. https://www.frbatlanta.org/banking/publications/financial-update/financial_update-vol_14_no_1-fannie_mae_and_freddie_mac.aspx https://www.frbatlanta.org/banking/publications/financial-up... (Somewhat outdated but mostly good info) 2. http://blogs.reuters.com/bethany-mclean/2013/08/20/getting-government-out-of-the-mortgage-business-is-harder-than-it-looks/ http://blogs.reuters.com/bethany-mclean/2013/08/20/getting-g... 3. http://www.npr.org/2015/03/24/395119065/as-economy-rebounds-government-still-plays-role-in-mortgage-business http://www.npr.org/2015/03/24/395119065/as-economy-rebounds-... 4. http://www.npr.org/sections/money/2015/04/21/401259676/who-owns-fannie-mae-and-freddie-mac http://www.npr.org/sections/money/2015/04/21/401259676/who-o...

no_flags 10y ago

"The only reason the banks accept such a piddling sum is because they immediately sell the loan to a government-run corporation(or maybe skim the interest for a year or two)." Being ignorant of the situation, I went to fact check this statement and was blown away by how true it is. I'm flabbergasted at the amount of involvement the US government has in the mortage market. More reading if anyone is interested: 1. https://www.frbatlanta.org/banking/publications/financial-update/financial_update-vol_14_no_1-fannie_mae_and_freddie_mac.aspx https://www.frbatlanta.org/banking/publications/financial-up... (Somewhat outdated but mostly good info) 2. http://blogs.reuters.com/bethany-mclean/2013/08/20/getting-government-out-of-the-mortgage-business-is-harder-than-it-looks/ http://blogs.reuters.com/bethany-mclean/2013/08/20/getting-g... 3. http://www.npr.org/2015/03/24/395119065/as-economy-rebounds-government-still-plays-role-in-mortgage-business http://www.npr.org/2015/03/24/395119065/as-economy-rebounds-... 4. http://www.npr.org/sections/money/2015/04/21/401259676/who-owns-fannie-mae-and-freddie-mac http://www.npr.org/sections/money/2015/04/21/401259676/who-o...