"GETTING RICH IS SIMPLER THAN YOU THINK"-MSN

[Bretsky]

Hear this very clearly - THERE IS NOTHING IN THIS WORLD THAT YOU HAVE THAT I WANT IF I HAVE TO BORROW MONEY TO GET IT. NOTHING.

Wait 'til your car blows up (literally--thank goodness no one was hurt), you live a couple miles from a bus stop, you have to get to work, and the insurance company gives you crap for a claim settlement. You can only borrow Dad's car for so long before he gets a little testy about it.

I've heard this excuse a thousand times. Reality - a $100 car will get you to work. There are dozens of cars just outside the city limits on an old highway with a for sale sign in them.

You can "justify" any spending if you really want to do that.

completely agree

[GrnBay007]

There is a reason that the turtle usually wins the race.

There's NO reason to bring Ted Thompson into this discussion!!
:P :P :P :P


Interesting points of view, btw.

[Bretsky]

perfect? NO, but probably good enough for a loan from your bank.


You are probably right; I'm surprised at some of the no money down stuff that gets approved these days. And I'm the eternal optimist so if I'm surprised then the deal has some hefty risk.

[i]You wouldn't have done the second refi, but otherwise, you'd have been proud to have them as a client.


Anybody who goes over 100% equity is making a huge mistake; that's why I questioned the credit as I'm surprised good credit people would get roped into this. It's a recipe for disaster nearly all of the time.


You have just emerged from one of the best 5 year track records for real estate in a long time. As I said before, you deal with the "cream of the crop" in terms of borrowers. If this market continues, you'll see a rise in your late pay rates,

I'll openly admit that I already have seen the raise in late pays. And I've did more counseling of customers in helping them make it the past year as opposed to the first four

[retailguy]

These people, not surprisingly are not bright (intellectually). HS diploma's, worked blue collar their whole career, but very hard workers. They rely on, and believe, the advice they are given.

Friends told them, debt consolidation was a great move. Friends and their banker told them they could buy a house with 5% down. But, NO ONE, told them how to budget, or that they couldn't go out to eat, or that borrowing for a washer/dryer was not smart.

Reality - If they had put 20% down, and not refinanced for debt consolidation, they could liquidate the house and probably would be ok. However, now, they have to fight because they didn't plan. Hey, I'll be the first to admit that life happens, but good planning helps with that. Bad planning ruined that and leaves them with no options.

This is the danger of not putting 20% down. The downside doesn't compensate for the risk. That's my main point....

[retailguy]

There is a reason that the turtle usually wins the race.

There's NO reason to bring Ted Thompson into this discussion!!
:P :P :P :P


Interesting points of view, btw.

Isn't this site becoming a dissertation on the "turtle"? :P

[retailguy]

Anybody who goes over 100% equity is making a huge mistake;

I'd just change one thing - Anyone who goes over 80% equity is making a huge mistake. :P

[GrnBay007]

I'll put my two cents in....no need to borrow for that!! :P

I think it'd be great to be in a position to put 20% down. When purchasing my second house.....first on my own, I didn't have 20% to put down on the purchase. I don't think it's a must in order to succeed. I think it's all in what you do and how you handle things after the purchase. I took a 30 year loan and now have a plan in place to have it paid in 15 years...no later than 18 yrs. One thing I don't think has been mentioned for homeowners and I'm a firm believer in it is having a certain amount of cash on hand for large repairs/expenses. That is an area people don't like to think about and don't plan for.....who wants to? But if something should happen it prevents from using credit or taking a home equity loan out.

[MJZiggy]

That's very true 007. When you least expect it definitely applies. I already have an inventory of the only things in this house that haven't broken yet and am putting aside the money to fix them now so I won't have to put repairs on the credit card later.

[oregonpackfan]

I'll put my two cents in....no need to borrow for that!! :P

I think it'd be great to be in a position to put 20% down. When purchasing my second house.....first on my own, I didn't have 20% to put down on the purchase. I don't think it's a must in order to succeed. I think it's all in what you do and how you handle things after the purchase. I took a 30 year loan and now have a plan in place to have it paid in 15 years...no later than 18 yrs. One thing I don't think has been mentioned for homeowners and I'm a firm believer in it is having a certain amount of cash on hand for large repairs/expenses. That is an area people don't like to think about and don't plan for.....who wants to? But if something should happen it prevents from using credit or taking a home equity loan out.

007,

As you probably know, many financial planners recommend people keep an emergency fund worth 3-6 months salary to handle unexpected financial emergencies be it job loss, loss of car, etc.

It sounds like you and MJZiggy are already observing those guidelines.

[Bretsky]

Anybody who goes over 100% equity is making a huge mistake;

I'd just change one thing - Anyone who goes over 80% equity is making a huge mistake. :P

That we will never never agree on. Too extreme IMO and most benefit from howe ownership and reality is very few have 20% down til second home

[Bretsky]

I'll put my two cents in....no need to borrow for that!! :P

I think it'd be great to be in a position to put 20% down. When purchasing my second house.....first on my own, I didn't have 20% to put down on the purchase. I don't think it's a must in order to succeed. I think it's all in what you do and how you handle things after the purchase. I took a 30 year loan and now have a plan in place to have it paid in 15 years...no later than 18 yrs. One thing I don't think has been mentioned for homeowners and I'm a firm believer in it is having a certain amount of cash on hand for large repairs/expenses. That is an area people don't like to think about and don't plan for.....who wants to? But if something should happen it prevents from using credit or taking a home equity loan out.

Good points

[Partial]

Anybody who goes over 100% equity is making a huge mistake;

I'd just change one thing - Anyone who goes over 80% equity is making a huge mistake. :P

That we will never never agree on. Too extreme IMO and most benefit from howe ownership and reality is very few have 20% down til second home

What constitutes equity?

[MJZiggy]

Equity is how much you owe vs. how much the house is worth. The market value of the house goes up, you have more equity.

[GrnBay007]

The difference in what you owe on your home and what it's worth.

[Bretsky]

Anybody who goes over 100% equity is making a huge mistake;

I'd just change one thing - Anyone who goes over 80% equity is making a huge mistake. :P

That we will never never agree on. Too extreme IMO and most benefit from howe ownership and reality is very few have 20% down til second home

What constitutes equity?

When you buy a home equity would constitute the difference between the purchase price and what you owe on the home loan.

So if you buy a house for 120,000 and put 20% down (24,000) you have a loan for 96,000 and a beginning equity position of 24,000.

Now if you own a home for a few years, your equity position increases as you pay the loan down and the value of the home goes up.

What RG was referring to is he feels it's a mistake for anybody to buy a home with a Loan (96,000 in above example) to Value (120,000 in above example) Ratio of over 80%.

He believes people should save up enough to put 20% down on a home and should not buy one sooner. Once you get to that level the odds of a person losing their home are very very minimal.

I've seen too many people succeed by putting either no money down or 5% down and then sell the home and use the sale proceeds to buy their next home to agree with his belief there.

But RG correctly points out I'm mainly dealing with strong buyers

Of course I'd argue if they are strong buyers than the 20% down rule should be tossed right out the window.

Cheers,
B