$cott wrote:
- quote -

Mortgages, specifically ARMs, are HIGHLY speculative, as they are
bundled as mortgage-backed securities on the exchange. ING direct is
going to make a KILLIN' on their ARM only business when they inevitably
go to sell their portfolios (they are one of the few lenders that don't
sell their mortgages thus far b/c rates are still low). They only
mortgage to high credit scored individuals, and only for very small
amounts relatively speaking, and never had fixed term mortgages as an
option. These mortgagees will be low risk but with high rates after
the housing bubble pops, as Cheney would say, big time.

Look for exotic mortgagors to be the next wave of VA Linux-esque
companies out there, folding like a house of cards.

Yours In Christ,
John

John,

Your flipping the script now, our discussion was originally based upon
someone that lost their job in 90 days and which loan would have served
them better (100% and retain 10-20% that was to be used for the
downpayment vs 80% financing). Your example doesn't include the
downpayment retention provision and written as you have, is a slam dunk
against 100% financing. 10-20% retained downpayment serves as a
parachute, a bridge and collateral for time and options.

Regards,

Scott Miller
Commercial and Residential Lender/Broker

www.RealEstate-IQ.com
www.EZMortgageLoanz.com




John A. Weeks III wrote:
- quote -


- quote -

Elle,

A person's relationship with risk and associated fear dictates many
things in one's personality and life, not just investments. I don't
"condemn" (mighty strong choice of words) anyone for their belief
systems, but suggest that money decisions are best made rationally,
rather then emotionally.

Regards,

Scott Miller
Commercial and Residential Lender

www.RealEstate-IQ.com
www.EZMortgageLoanz.com

Elle wrote:
- quote -

We are discussing mortgages (with little to no speculative attributes)
vs stocks? I understand your point, but is less relative in the
context of this financial decision.

Regards,

Scott Miller
Commercial and Residential Lender

www.RealEstate-IQ.com
www.EZMortgageLoanz.com

johnsmith060[at]gmail.com wrote:
- quote -

Bob,

I think you are oversimplifying the benefit of having cash reserves in
the event of unemployment, but in any event, a "better bargaining
position with the bank" is of value and not available using the other
poster's approach.

Therefore you are not really in the same position are you (in this
case)?

Regards,

Scott Miller
Commercial and Residential Lender/Broker

www.RealEstate-IQ.com
www.EZMortgageLoanz.com

- quote -

- quote -

Just like the little discomfort I got hearing someone seriously ask
their friend whether they should hold or sell their VA Linux stock at
$150/share back in 1999. Hope he sold early.

Yes, discomfort can be a VERY good thing.

Yours In Christ,
John

John A. Weeks III wrote:
- quote -


I don't believe in no-money-down home loans (except *maybe* for rental
or investment property, where judicious leverage can be a good thing),
but I'll play devil's advocate:

If they took $cott's advice, they have $20000 in CD's (the 10% that they
could have put as a down payment, but didn't to preserve their
liquidity.) They are in exactly the same position regarding the sale of
the house as they would have been if they paid 10% down -- except they
are in a better bargaining position with the bank if they can't sell the
house.

Bob

In article <1138175262.926845.278390[at]g14g2000cwa.googlegroups.com> ,
"$cott" <ezmortgageloanz[at]aol.com> wrote:

- quote -

Sure it does. Lets look at some numbers. Family of 4 earning $60K
owns a $200K house, zero down loan at 6% fixed, 30 years. 6 months
into the loan, guy works for GE, gets transferred from Huntington
Indiana to Tucson Arizona. They have to sell the house before they
can qualify to buy a house in Tucson.

6 months in, they have maybe $2000 in equity. House sells for
$198,500. At closing, they get $183,000 after closing costs.
Loan value is 198,000. In order to pay off the mortgage to convey
a clear title on the house, the cash to the seller is $15,000
short of the loan value.

Where does the $15,000 come from? If they don't have $15,000
in savings, they are not selling the house. If they somehow
borrow the money (keeping in mind that they don't have a home
or home equity to borrow against), then they will have a much
harder time getting a house loan in their new city. Basically,
they are screwed on both ends of this deal by going 0% down.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

Oh, it appeared you were making a broad statement and not a regional
claim, my bad.

Regards,

Scott Miller
Commercial and Residential Lender/Broker

www.RealEstate-IQ.com
www.EZMortgageLoanz.com

John A. Weeks III wrote:
- quote -

Please see my comments below:

John A. Weeks III wrote:
- quote -

RESPONSE: I already defended the risk factor to when someone loses a
job (the same defense can be made for disability, divorce, death of
bread winner, etc.). The OP is of above average means and a 10K "risk"
is less of a factor then anyone earning 25K/30K/35K per annum (is this
what you mean by rank and file)?. Yes, time is a accumulator of money
but so is leverage, tax sheltering and some of the other ideas I
presented.
- quote -

RESPONSE: Whether you have equity or don't has no bearing on whether a
home selling process. (I like this house, it would be perfect for the
kids.....how much equity is in the house right now? Might work with a
seller on the doorsteps of bankruptcy/foreclosure, but not in the
traditional sense). Property condition and recent past sales
comparables set the price of a home. Keeping the 10-20% in reserves
(and going with a low downpayment loan type) allows for the unexpected;
making two payments, etc. Isn't this real risk reduction? Your idea
reduces the risk for the bank, not yourself.
- quote -

loan programs and loan structuring strategies that allow for the
avoidance of PMI. I did not advocate paying PMI.

Regards,

Scott Miller
Commercial and Residential Lender/Broker

www.RealEstate-IQ.com
www.EZMortageLoanz.com


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a few lines to add context, the previous post is deleted.

John A. Weeks III wrote:
<snip> Never, ever think of doing that. First, you don't want to take
- quote -

I have the same feeling with respect to converting unsecured debt to
secured debt (basically). I'm not going to do it. I just sent the
last funds transfer today and paid off the last credit card, so I am
debt free.

Of course this will push back my time table for buying a house, but I
shouldn't really rush into anything if I don't have the cash for it,
right?

--
Mike

Thanks to all who replied. I've decided to pay down my consumer debt
first, then buy a place. It just makes more sense for me and I can
sleep at night.

Thanks.

--
Mike

"$cott" <ezmortgageloanz[at]aol.com> wrote
On houses, down payments, and choosing between investing
choices:
- quote -

But that's the rub: One cannot always know with certainty
which of two options will net one the most. One has, at
best, only estimates of risk and return. If a rational
person feels discomfort with X amount of risk, then s/he
won't take that risk. Surely that's a decision based in the
emotion of "discomfort." I hope it's one you don't condemn
others for having. A little discomfort (or fear or
skepticism etc.) can be a healthy thing.

"$cott" <ezmortgageloanz[at]aol.com> wrote
- quote -


Unless you list some assumptions here, I don't see how it
enhances the loss in any meaningful way. Same deal if the
market goes North.

snip stuff previously discussed in another thread, regarding
equity's rate of return and value.

In article <1138028889.321864.95940[at]g14g2000cwa.googlegroups.com> ,
"$cott" <ezmortgageloanz[at]aol.com> wrote:

- quote -

We have had that discussion before. You ignore risk in all of
your computations. That might work for a person who has deep
pockets and can afford to take a financial bath every so often.
But for the average rank and file person, a financial bath is
something that they might never recover from. The value of money
is in time, and if you have to start over because of a mistake,
you simply don't have the time.

In this case, consider what would happen if a person goes with
a zero percent down loan, and then 90 days later, they get
transferred half way across the US for work. If they have
no equity, they might have a hard time selling the house. At
the very least, they might have to put up a big check a closing.
If one has 10% to 20% equity, then they have enough money in
the house to close a sale without having to beg, borrow, or
steal. It is pure risk reduction.

It also makes common sense to not pay PMI. If you have 20%
in the house, you don't pay PMI. A PMI payment is pure flush
money--it has the same value to you as money you flush down
the terlit. It doesn't help you at all, it only helps the
lender, and they are already covered by having a mortgage
on your house. Why waste $100 or more a month when you don't
have to?

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

In article <1138058360.482427.212700[at]g49g2000cwa.googlegroups.com> ,
"$cott" <ezmortgageloanz[at]aol.com> wrote:

- quote -

They are based on actual house closings in Dane County Wisconsin
in 2004 and 2005. That includes Madison, Wisconsin, and suburbs.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

In article <1138030499.579822.195920[at]g14g2000cwa.googlegroups.com> ,
"$cott" <ezmortgageloanz[at]aol.com> wrote:

- quote -

I don't think that this advice considers risk. If you get yourself
too wound up with payments, and then something happens where, for
example, you lose your job, you risk losing it all. If you take
care of the consumer debt, then you have only one payment to worry
about. Much safer, and much less likely to get your can booted
out onto the street.

- quote -

FHA loans are a miniature nightmare. Avoid them at all costs.
Only consider FHA if you have absolutely no other choice. If
you go into a house sale with an FHA, you are just as likely to
have the seller go with a different buyer that has a non-FHA
lender.

- quote -

Never, ever think of doing that. First, you don't want to take
unsecured debt and pledge your family home for it. If it is
unsecured today, leave it that way. Second, you don't want to
convert short term debt into long term debt. That would be like
paying for a pizza over 30 years.

Pay off the cards, cut them up if you have to, then worry about
a house.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

John,

I don't know where you get your information, but it isn't accurate
according to the very industry watchdogs that monitor the ebbs and
flows of real estate (National Association of Realtors for example).

- According to a recent NAR survey, only 43% of first time home buyers
dedicate 0-2% for downpayment requirements. See the following link as
highlighted in the USA Today for details;
http://mortgages.interest.com/conten...31&ID=interest
- The same NAR survey indicates that only 18% of repeat buyers dedicate
0-2% for downpayment requirements. See www.realtor.org for further
details.

As people use this forum in part to make decisions, information that is
shared should be as factual as possible.

Regards,

Scott Miller
Commercial and Residential Lender/Broker

www.RealEstate-IQ.com
www.EZMortgageLoanz.com


John A. Weeks III wrote:

- quote -

jIM,

I have already noted that the only real benefit for placing that amount
of downpayment on a home is the avoidance of PMI (read my previous post
to Mike).

As Elle has correctly put it, you have mitigated the lender's risk by
ignoring the principles of leverage, not your own. If the market goes
south, having a buffer (your money in the form of purchased equity)
does you no good. It enhances your loss, not minimizes it.

The value of your downpayment has no bearing on the future value of
your home; just the future value of your equity. I have argued that
equity has no rate of return; equity is worth zero until one of two
things happen. You sell it out or cash it out. (I have already been
put on the firing squad for this opinion, feel free to have at it again
Mr. Weeks).

My advice on leverage in the context of this discussion is exclusive to
the why one would consider a low downpayment vs. 10-20%. What you do
after the loan has been finalized (making accelerated payments,
bi-weekly payments, etc.) is another discussion for another day (There
are compelling arguments from the "live debt free or die" and "seperate
your equity from your home and invest it in a sidefund that yields a
higher return then zero" crowds).

Regards,

Scott Miller
Commercial and Residential Lender/Broker

www.RealEstate-IQ.com
www.EZMortgageLoanz.com

Elle wrote:
- quote -

RESPONSE: I agree and so do the lenders.
- quote -

RESPONSE: An rate buydown can afford you lower interest rate, but I
don't know if a part of the 10-20% downpayment was intended for this
purpose (so I assumed it wasn't). The FHA loan recommendation allows
for the OP to get the same interest rate (and arguably better terms,
i.e. lower lending fees) as if he went to his local Bank of America
branch with only 2.75% down.

- quote -

RESPONSE: Obviously, but it doesn't mean it is the smartest use of
your money (particularly if the money can yield a greater return
elsewhere)

- quote -

RESPONSE: Although we might get emotional about our money, I don't
think that emotions and money are not good bedfellows. Do what nets
you the most period. It's money, and in my book, it's serious
business.
- quote -


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a few lines to add context, the previous post is deleted.