Down payment requirements - Lenders wary?

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screwrealestate_IHB

New member
<p>So two people I have talked to in the last week have had similar problems in unloading their houses. I guy at work said a neighbor was all set to sell his house when on the day of closing, the lender told the buyer they needed to up their downpayment from 5% to 30%. Of course, the buyer walked. Today I was talking to my neighbor who is going through foreclosure and he said that it failed to sell because the bank was wanting a 40% downpayment from any buyers and there ware no takers. </p>

<p>Anyone else hearing this too? I would theorize that the lenders know it has another 30% or more to drop and so need to cover all their potential losses...</p>
 
I think it's hard enough to find people with 20% down payment, let alone 30 or even 40%. I'm guessing that those buyers had less than stellar credit and or could not fully document incomes. If they had 20% down payment, full-doc'd income, and 740+ FICO scores, that they should be able to secure a loan within 28%-33% DTI.





This market is kind of a catch-22.. banks who are unloading REO's and approving short sales need buyers who can get loans. If banks aren't willing to give out the loans without huge downpayments, then their REO will sit, and foreclosures will turn into REO.
 
<p>So 0 to 10% downpayment is a thing of the past? No more stated income??</p>

<p>If that is the case, the market is up for a MAJOR correction, I think it is safe to assume most house purchased within the past 4 years fall into the above bracket..</p>
 
The same reason which may cause a large decrease in home prices is the same reason why most folks will not be able to take advantage of those prices. There will not be any money to borrow.
 
Seems like it's been the trend for ppl to put down as little as possible, considering 40% of 1st-time buyers had 0 downpayment in '06, and 23% of loans in OC in '06 were subprime. Granted, those don't make up the majority of the market, but I'd say it points to the notion that many people either don't have or don't want to put a lot of money to get into a house. I'm guessing it's more they don't have a real downpayment.
 
if standards stay this strict where they expect 10% down full documentation, or 20% down stated....do you think the average loan will fall at around the jumbo loan threshold?
 
<em>"if standards stay this strict where they expect 10% down full documentation, or 20% down stated..."</em>





In a credit crunch like the one we are seeing now, the standards you listed above are mere roadsigns on the journey. The standards you listed above are not strict. They are very liberal by non-bubble standards.





Stated income is going away. Gone. It is not coming back. Too much fraud.





20% down with full documentation will become the norm.
 
<p>IrvineRenter, I hope you're right. It'll finally bring down prices to a point where it actually makes financial sense.</p>
 
<p>"Stated income is going away. Gone. It is not coming back. Too much fraud."


</p>

<p>Really? What about all of these self employed people? Don't you think they need to keep it around for them?</p>
 
What for? Put more money down to get your DTI in ratio with doc'd income, if not then move more into your wages to get your income up. I can see stated being around, but plan on it having 150-200 basis pt premium to offset some risk.
 
<em>"Don't you think they need to keep it around for them?"</em>





Stated income loans are not the only means of getting a loan for a self-employed person. They can go full doc. The argument for self-employed people using stated income is that they are hosing the IRS, but they don't want that fact to impact their ability to obtain a home loan. If a self-employed person were paying all their taxes and accurately reporting their income -- something W2 borrowers do by necessity -- they would qualify for a loan based on their income.





In short, I think stated income loans will go away or they will simply not be offered to anyone with W2 income. They will probably disappear for a time because there is no way to distinguish the fraudsters from the genuine borrowers.
 
<p>Doesn't look like standards will be loosening anytime soon...</p>

<p>Quote from <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20071015a.htm">http://www.federalreserve.gov/newsevents/speech/bernanke20071015a.htm</a></p>

<p>In contrast, despite a few encouraging signs, conditions in mortgage markets remain difficult. The markets for securitized nonprime (that is, subprime and so-called alt-A) loans are showing little activity, securitizations of prime jumbo mortgages reportedly have increased only slightly from low levels, and the spread between the interest rates on nonconforming and conforming mortgages remains elevated. These continued problems suggest that investors will need more time to gather information and reevaluate risks before they are willing to reenter these markets. </p>
 
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