Isn’t That Counter-Productive?
I’m a bit perplexed about something. Back in the good ole’ days, when Americans weren’t buying McMansions and didn’t feel the sense of entitlement that they do today, people would put 20% down to purchase a home or a condo. The rest would be financed.
As the economy soared in the 1990’s and 2000’s, that threshold was reduced to 10% and 5%. As real estate prices skyrocketed to absurd levels, mortgages were offered with no money down. Now, I’m the first to admit that I find that insane. And, quite frankly, I feel no sympathy towards the people who purchased homes well beyond their means when they couldn’t even prove themselves capable of saving enough money to put down even a modest down payment. I mean, come on, the fact that you had no money saved to even purchase a residence in the first place should be the biggest warning sign to any lender that you’re not ready for ownership.
Anyway, although I find “no money down” to be absurd, in areas of the country where real estate is rather high (northeast, west coast, etc…) I can understand requiring 10% down.
But now with banks no longer lending as freely as they once did, and the economy effectively in the shithole, banks are increasing the down payment requirement to 25% for condos. TWENTY-FIVE percent! That’s insane. Considering Boston area condos start in the $200K range and can go for as much as $500K for a decent 2 bedroom place (even in areas like Somerville, Medford, and Arlington), this means some people will need to have $50,000 to $125,000 (or more) in cash up front.
Add to that the fact that you should keep a reserve of 3-6 months worth of expenses in savings, and this is going to severely limit the ability of many (if not most) people to purchase a new residence. I thought the whole purpose of these stimulus packages was to increase bank lending and increase purchasing? If somebody has 10% ($50,000 in cash), plus 6 months in reserves, plus a solid job, plus a stellar credit rating….shouldn’t they be able to buy?
I don’t think there should be exceptions to the rule…that’s how this whole mess started. But is it too much to ask to just implement some realistic rules in the first place?
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