7 ms·

I normally don't talk to people much about real estate, house prices, mortgages etc., but the local real estate market has heated up a little so I have been tal

• burlesona 5y ago
  The ability to pass less than 20% with PMI has been a thing for a long time... It was around before the 2008 crash and never went away afterwards. The bar to qualify for a mortgage went up, and has come back down some (though not all the way to pre-2008 levels), but PMI didn't really change AFAIK.
  • ghaff 5y ago
    I had a mortgage that had PMI for a time in the late 90s. (I could have afforded 20% but then I couldn't have afforded a bunch of improvements which the fixer-upper really needed.)
• onion2k 5y ago
  Most young people don't earn even close to enough to save 20% of the cost of a house. Without those people (first time buyers) entering the market the entire market grinds to a halt as there's no one to buy on one end of a chain. The bank's mortgage businesses would collapse. They had to start offering alternatives to down payments.
  • closeparen 5y ago
    How can it be that they earn enough to make the monthly payments, then?
    • tdfx 5y ago
      Historically low interest rates. Also, the average percentage of household income allocated towards housing has been steadily increasing.
    • crooked-v 5y ago
      They're already paying more than that much in rent. They just can't put together that and 20% of the full (greatly inflated) valuation at the same time.
      • closeparen 5y ago
        Where? In the expensive coastal markets the price to rent ratio is enormous; the mortgage is much higher than the rent on the same home.
        • nicoburns 5y ago
          A lot of the UK
        • chrisseaton 5y ago
          > the mortgage is much higher than the rent on the same home That would really surprise me. Everyone I know talks about how much cheaper it would be to buy if only they could afford the deposit. Most of the time the mortgage is lower than the rent for the obvious reason that when you rent you're both paying the landlord's mortgage, plus their profit.
          • fknorangesite 5y ago
            > when you rent you're both paying the landlord's mortgage, plus their profit. True, of course. But you are also paying the landlord's property taxes and maintenance costs and (sometimes) utilities and.... A pet peeve of mine is when people compare mortgage payments to rent payments as if they are a equivalent. There is a lot of additional overhead in homeownership beyond the mortgage payment. Though maybe it's a sore point for me because my furnace died this morning and it's -40 outside so guess who gets to drop an unplanned $6k this week?
  • syshum 5y ago
    No, with out those buyers the market could not support the MASSIVE increase in prices many multiples of inflation in some markets, they "HAD" to start offering alternatives or sellers would have to seek only reasonable profits on the sell instead of exorbitant profits... the horror
    • onion2k 5y ago
      People treat their house as a retirement fund, or just an investment. They won't sell at a loss. If prices go down they just won't sell, which would also make it impossible for bank's to sell mortgages to people buying. Buyers can't buy if there are no sellers. People have to keep buying houses forever or the banking system will fail.
      • syshum 5y ago
        >>They won't sell at a loss. If prices go down they just won't sell, This is absolutely false. Many people have sold at a lost over the years for many reason including job relocation, family issues, bankruptcy, etc et etc That said Pricing going down != loss, for example I bought my current home 5 years ago, I bought it below market value, and after 5 years of value increases prices would have to drop more than 20% for me to sell it for less than I paid for it, and much more to "take a loss" if you calculate profit / loss properly factoring the value of shelter provided (which no one does) >>People treat their house as a retirement fund, or just an investment. That is a problem society has yes...
      • WalterBright 5y ago
        I sold my previous house at a substantial loss.
    • fleddr 5y ago
      The moral preaching is out of place. When you own a home and are selling it, you go for the highest bidder. The idea that anybody at all would give a politically motivated discount is naive. The more important point is that in a supply-constrained situation, there isn't really going to be a "buy the dip" moment. Most home owners that are under water are under no pressure to sell, yet buyers are on the clock.
  • worker767424 5y ago
    I'm in a bizarre place financially. I'm single, in the Bay Area, and work for a FAANG. I have enough saved for 40+% down for a lot of decent things, so I'm limited by my salary, not my down payment. It's extra weird because RSUs don't necessarily count towards salary for mortgage purposes, but they're (for now) a significant chunk of my net pay. I'm also a little worried about putting a lot down because prices might go down when interest rates go up. I realize this isn't normal. Most people are somewhere cheaper, lots are married, and most have nowhere near as much cash.
    • jtmarmon 5y ago
      > It's extra weird because RSUs don't necessarily count towards salary for mortgage purposes, but they're (for now) a significant chunk of my net pay. Are you sure this is true? In my (admittedly limited) experience, the way it works is that the bank asks for your annual income and you have to provide proof of that, which you can do by providing a statement from the brokerage account your company vests your RSUs to. RSUs issued from your (presumably publicly traded) company are liquid, so you can pretty easily claim them as part of your annual income and get a mortgage against that income.
      • worker767424 5y ago
        It did with one lender I talked to (Rocket Mortgage). I'll check with another (probably First Republic).
    • oceanplexian 5y ago
      This depends a lot on the bank, most of them are glad to use stock as part of the income calculation so long as you have a history of vesting a certain amount over time. It works the same way as bonuses or commissions, if you want variable income to count toward your DTI you need to demonstrate you get it regularly.
    • NathanKP 5y ago
      RSU's absolutely do count for income for mortgage purposes. (Source: I've bought a house recently and my RSU's were accepted as part of my income). It's different if you work at a startup, where the stocks are not yet publicly traded, but if you are working at FAANG it is publicly traded, then the stock is quite liquid, so banks consider those RSU's to be as good as dollars. You just need a document from your employer demonstrating to the bank what they are intending to pay you per year in total compensation, including both salary and RSU stock. Also get some documents from your stock broker showing how many RSU's you have vested so far versus ones that are scheduled to vest over the next X years. For a bonus: rather than liquidating all your vested RSU's for the downpayment, hold onto a good number of RSU's in your brokerage account as these can be used to show you are holding assets, which can help you get a lower mortgage rate as well. Banks love to see that you have assets you are holding onto and can liquidate just in case you do need cash. Their ideal customer is someone who can technically buy a house in cash, but is only applying for the mortgage because the mortgage rates are currently lower than the stock return rates. Chances are if you work at FAANG and have RSU's that's actually considered a very safe loan that you are basically guaranteed to be approved for at a very nice low mortgage rate. You'll be able to get approved by multiple banks, and then get them to compete with each other to lower their rates by fractions of a percent to try to win your mortgage agreement. Mortgage brokers are your friends here, pay one to do the hard work of contacting the banks on your behalf and make sure your documents look good and then the banks will be falling over themselves to give you a loan.
  • jjoonathan 5y ago
    > the entire market grinds to a halt By which you actually mean "prices come down to earth," which is a good thing, just one that many powerful interests don't want to happen because they have bet against it.
    • jahewson 5y ago
      No the entry-level end would just switch to a rental market. Those already in the market can afford to buy up starter homes as rental properties. Those not yet on the ladder would get locked out as eternal renters. The solution, as with the original problem is to build more housing.
  • colechristensen 5y ago
    What it seems like is house pricing adjusts to be affordable for a similar number of people regardless of what you do. Give people bigger, longer term loans and you don’t give more people access, you just make prices higher. What you need to do is remove the dead weight from the market: i.e. do things to reduce investors and mortgage writers siphoning money out of the economy. What this means is smaller, shorter term loans and taxes on commercial real estate lending and leased land and housing.
  • PaulDavisThe1st 5y ago
    In the UK, one part of the (insane) government response to this stagnation of new buyers entering the market has been to start adding absurd schemes such as partial-buy-plus-rent-to-buy, in which the "buyers" only own/mortgage part of the property, pay rent on the other part, and accrue some level (not necessarily very much) of credit to reduce the cost of buying the rented part should they ever decide to do this. It reduces the down payment cost substantially, but doesn't change the monthly payments much at all. It's also totally freakin' nuts.
• cm2012 5y ago
  I just bought with 5% down, though I have good credit and income.
• Tagbert 5y ago
  When we bought, we had enough for 15% down but could not reach 20%. Since we had to get mortgage insurance anyway, we were advised to just put 5% down and hold back the rest to cover moving expenses and setup for a new house. 5 years later we had paid off enough to refinance at a lower rate, shorter term, and without the PMI.
• spamizbad 5y ago
  Eh, we purchased a home (a fixer-upper) at 10% down and put that cash towards improving it. We had to pay a modest amount of PMI (about $85/month). Refinanced it 3 years later; new assessed value put us over 20% equity and we no longer had to carry it. I assume they let us do this because we purchased below our “max budget” - so even if we took a pay cut, paying the mortgage would still be feasible. 2 of many factors that contributed to the lending crisis in 2008 aren’t necessarily a factor: the first being extremely relaxed lending standards (as in people with no real verifiable income getting loans) and the second being the proliferation of ARMs. My understanding is standards tightened during the pandemic but I could be wrong.
• fleddr 5y ago
  The problem with a percentage-based down payment is that wages do not keep up with the housing market. In my country, the price of real estate appreciated by 20% in a single year. Wages are likely negative given the high inflation. On a longer time period of 25 years, houses have tripled in price, yet wages have not. So whilst the percentage stays the same, the absolute value of the down payment grows out of control and is no longer affordable.
• dyeje 5y ago
  There have been mortgage products with less than 20% down for a long time now. I bought a house in 2016 for 3.5% down, I had at least 3 separate lenders give me a loan estimate with those terms.