[josephr25]

What do I tell a coworker who really wants to buy a house (he's renting), but he really wants the FHA program? He says he and his wife don't save a lot (she doesn't work and is getting her masters; he pays for everything); he has a child, and is banking on the FHA loan? I showed him some of the articles posted before.

[persian54]

Originally Posted by josephr25

What do I tell a coworker who really wants to buy a house (he's renting), but he really wants the FHA program? He says he and his wife don't save a lot (she doesn't work and is getting her masters; he pays for everything); he has a child, and is banking on the FHA loan? I showed him some of the articles posted before.

Buy something cheaper then?

[MediaArtist]

Originally Posted by josephr25

What do I tell a coworker who really wants to buy a house (he's renting), but he really wants the FHA program? He says he and his wife don't save a lot (she doesn't work and is getting her masters; he pays for everything); he has a child, and is banking on the FHA loan? I showed him some of the articles posted before.

Well, let's think about it.

Do you think a guy who is barely able to save money, on a single income, should be purchasing a home with his wife still in school and with a small child? That's seems extremely risky, if not irresponsible IMO.

Your friend seems to be living above his means if he can't save money, or he's got tons of debt that is sucking up a lot of his take home pay. Either way, it's not a good situation to be in when making one of the biggest purchases of your life.

He should wait until his financial situation gets better, or rent somewhere cheaper so he can actually save money. One of the best things he can do in this economy is pay off debt. That will give you instance "returns".

I don't think it's the right time for him to buy a home.

[JasonCSU]

Originally Posted by josephr25

What do I tell a coworker who really wants to buy a house (he's renting), but he really wants the FHA program? He says he and his wife don't save a lot (she doesn't work and is getting her masters; he pays for everything); he has a child, and is banking on the FHA loan? I showed him some of the articles posted before.

I would agree that it doesn't seem like the right time financially to buy a home for him. If he doesn't save very much, would he even have the 3.5% required for an FHA loan? There are also other potential costs to factor in such as a home inspection, closing costs, and moving costs. He may also have to buy appliances as not all places have a refrigerator or washer and dryer. These are some of the costs people don't necessarily think of when they start shopping for a house.

It would probably be best for them to wait until she finishes school and finds a job. Once that happens, it will improve their debt to income ratio which will allow them to save more for a house.

[josephr25]

Originally Posted by JasonCSU

I would agree that it doesn't seem like the right time financially to buy a home for him. If he doesn't save very much, would he even have the 3.5% required for an FHA loan? There are also other potential costs to factor in such as a home inspection, closing costs, and moving costs. He may also have to buy appliances as not all places have a refrigerator or washer and dryer. These are some of the costs people don't necessarily think of when they start shopping for a house.

It would probably be best for them to wait until she finishes school and finds a job. Once that happens, it will improve their debt to income ratio which will allow them to save more for a house.

Yeah I told him about these things and what Media said, but he is determined to buy a place... even thought about moving out of state. I wish he would look at the bigger picture besides just owning a place... he's had a questionable credit history too.

He's renting in a relatively wealthy area so that his kid can grow up in a good neighborhood, but that just brings up more red flags itself.

[MediaArtist]

Originally Posted by josephr25

Yeah I told him about these things and what Media said, but he is determined to buy a place... even thought about moving out of state. I wish he would look at the bigger picture besides just owning a place... he's had a questionable credit history too.

He's renting in a relatively wealthy area so that his kid can grow up in a good neighborhood, but that just brings up more red flags itself.

I think in many aspects, he's like a lot of other people who have been tricked into thinking home ownership is the American dream, and everyone should buy a home. Everyone should lease and expensive sports car. It's only credit, it's not money right?

You would think after millions of foreclosures, and trillions in lost housing equity, people would learn their lesson, and actually do the arithmetic to see how much they can truly afford.

But I swear it's like they are lemmings jumping off a cliff, it's emotion over logic. I don't understand it, and the worst part is with this looming FHA bailout, they are bringing the rest of us over that same cliff.

I hope the end result of this bailout is that FHA finally disappears as a defacto sub-prime lender, and we don't give $729,000 FHA loans anymore to people with 600 FICO scores.

[MisterSkiMask]

Originally Posted by MediaArtist

I think in many aspects, he's like a lot of other people who have been tricked into thinking home ownership is the American dream, and everyone should buy a home. Everyone should lease and expensive sports car. It's only credit, it's not money right?

You would think after millions of foreclosures, and trillions in lost housing equity, people would learn their lesson, and actually do the arithmetic to see how much they can truly afford.

But I swear it's like they are lemmings jumping off a cliff, it's emotion over logic. I don't understand it, and the worst part is with this looming FHA bailout, they are bringing the rest of us over that same cliff.

I hope the end result of this bailout is that FHA finally disappears as a defacto sub-prime lender, and we don't give $729,000 FHA loans anymore to people with 600 FICO scores.

I don't know how people get these loans. In the middle of this past summer my wife and I (both have nearly perfect credit, no auto loans, and plenty of income) were put through the ringer to get a $415,000 loan while putting 23% down.

[persian54]

Originally Posted by MediaArtist

it's emotion over logic. I don't understand it,

Could the REAL Story be that it's his WIFE making the decisions/pressuring him?

Since that statement is what you'd expect if it was a woman making the choice.. and we wouldn't be surprised.
No not being sexist (ok maybe a little), but we all know that the majority of women make decisions based more on emotion than logic.

And because we men cannot understand it, it MUST be coming from a woman's mind...right?

[josephr25]

Originally Posted by persian54

Could the REAL Story be that it's his WIFE making the decisions/pressuring him?

Since that statement is what you'd expect if it was a woman making the choice.. and we wouldn't be surprised.
No not being sexist (ok maybe a little), but we all know that the majority of women make decisions based more on emotion than logic.

And because we men cannot understand it, it MUST be coming from a woman's mind...right?

If it was the other way around, I'd still question the idea that there's only one person working and that there's grad school debt.

[josephr25]

Originally Posted by MisterSkiMask

I don't know how people get these loans. In the middle of this past summer my wife and I (both have nearly perfect credit, no auto loans, and plenty of income) were put through the ringer to get a $415,000 loan while putting 23% down.

My friend who works at Chase told me a story during the sub-prime era... when my friend would reject an application because of all that credit stuff blah blah blah, his coworker would pick that person up and approve them eventually.

Profit>integrity.

[kevinbahnz]

I just got turned down for a loan I was going to put 30% down so my payments would be lower and with 780 fico but the reason I was denied is because I am self employed. whamp whamp whamp.

[MediaArtist]

Originally Posted by MisterSkiMask

I don't know how people get these loans. In the middle of this past summer my wife and I (both have nearly perfect credit, no auto loans, and plenty of income) were put through the ringer to get a $415,000 loan while putting 23% down.

There are plenty of shady lenders out there who will underwrite any crappy loan and package it up. Especially FHA where they know that the government is on the hook for it. I've seen people with foreclosures from 2008-2009 qualifying for loans again. So there are lenders out there acting like it's 2005-2006.

FHA hasn't been serving its original purposes for a very long time, it's simply a sub-prime lender, and now we're going to pay for it. Funny thing is I called it nearly 2 years ago in this thread:
http://www.e90post.com/forums/showth...&highlight=FHA

Of course I had people jumping down my throat saying I didn't know what I was talking about, guys like "NBRider88" and "48laws", yet, here we are. FHA is bankrupt, and we the taxpayer are going to bailout the lemmings who went and bought $500,000 homes with barely any income, and no savings. Go USA!

[carogers86]

This thread has had some activity! From what media artist has said, it seems that the program has been taken advantage of. I am thankful for the program. I feel I used the program responsibly and with out it, I would not have passed the 1 year mark of home ownership. Instead, it would have been a lost opportunity and I would have shelled out another $13,200 to a crappy landlord.

If used as intended and responsibly, it is a great program. I haven't had the time or desire to research and review its current status, and its terrible to learn that those that are using it irresponsibly could potentially ruin for people like myself.

[MediaArtist]

Originally Posted by carogers86

This thread has had some activity! From what media artist has said, it seems that the program has been taken advantage of. I am thankful for the program. I feel I used the program responsibly and with out it, I would not have passed the 1 year mark of home ownership. Instead, it would have been a lost opportunity and I would have shelled out another $13,200 to a crappy landlord.

If used as intended and responsibly, it is a great program. I haven't had the time or desire to research and review its current status, and its terrible to learn that those that are using it irresponsibly could potentially ruin for people like myself.

The amount of irresponsible FHA users >>>>>>>>> The amount of responsible FHA users.

Unfortunately.

[amanda hor$t]

didn't read the thread, but the loan process definitely sucks now.

in '04 i got in with a sizeable down, good credit, and no job. on the way out now, got tired of the area and i have something better and free here.

the entire credit system gets on my nerves. i live my life $100 at a time, and the way i do it, it goes pretty far lol. cracked the last 100 on wednesday i think, still have 20

kinda unrealistic for most, but i think the best way is to save up, live frugally, and just get into something very modest (and pay it in cash!)

[JMX328]

The FHA program, while having the best intentions, is unfortunately heavily taken advantage of by people who cannot seemly understand how to manage their financial obligations.

In my opinion... everyone should have 20%+ to put down on a home. With that level of investment, it makes it much, much harder to just up and walk away from it.

[MediaArtist]

Originally Posted by JMX328

The FHA program, while having the best intentions, is unfortunately heavily taken advantage of by people who cannot seemly understand how to manage their financial obligations.

In my opinion... everyone should have 20%+ to put down on a home. With that level of investment, it makes it much, much harder to just up and walk away from it.

Plus people who can actually save 20% of the price of a home obviously have sense of how to manage their finances.

Right now the average down payment amount is 9%, and the amount of jumbo loans as a percentage of all loans is back to 2007 levels. With the FHA bailout on top, tax increases, and austerity now a way of life, the housing market is going to take an ass kicking.

[carogers86]

I think I manage my finances pretty well, but I didn't have 20% down. Didn't want to waste more time than I had to saving. I could buy a house in a responsible manner and waste less time saving up.

I remember media artist making a point that investors don't use FHA.

I bought my house FHA as an investor. I didn't buy this house to have empty guest rooms and host tea parties - I did it for the cash flow that I knew was possible for only 3.5% down + closing costs. I'm not a rocket scientist. My ex gf did the same. We both rent out rooms that subsidize the mortgage (or in my case cover the mortgage + ~$550 in bonus cash every 1st of month).

My current gf has ex classmates who were given cash from parents in amounts that could purchase nice houses for 20% down. Instead they buy used 7 series bimmers or brand new 335is - no jobs. Having 20% down to put down on a house isn't a measure of financial responsibility..

I think there are exceptions on both sides of the argument.

In short: listen to media artist and save for 20% down on a house. In the mean time, I will let you savers know when I have a vacancy in one of my rooms in one of my houses.

[MediaArtist]

Some people don't have the option to fill every room in their house with a tenant, or want to put up with having to live with their tenants (if it's their first home).

I actually do think places like Stockton, Sacramento, Las Vegas, and Atlanta have had prices come down far enough that they have hit rental parity even with less than 20% down. That doesn't mean there isn't some downside risk to losing what little equity someone might have with only 3.5% down, but if the property is at rental parity, then I guess it softens the blow somewhat.

Also add to the fact that none of those locations are prime locations for RE, and it shows in their prices as well. West LA, South OC, and Santa Clara County are for the most part far, far away from Sacramento price wise.

[josephr25]

Originally Posted by carogers86

I think I manage my finances pretty well, but I didn't have 20% down. Didn't want to waste more time than I had to saving. I could buy a house in a responsible manner and waste less time saving up.

I remember media artist making a point that investors don't use FHA.

I bought my house FHA as an investor. I didn't buy this house to have empty guest rooms and host tea parties - I did it for the cash flow that I knew was possible for only 3.5% down + closing costs. I'm not a rocket scientist. My ex gf did the same. We both rent out rooms that subsidize the mortgage (or in my case cover the mortgage + ~$550 in bonus cash every 1st of month).

My current gf has ex classmates who were given cash from parents in amounts that could purchase nice houses for 20% down. Instead they buy used 7 series bimmers or brand new 335is - no jobs. Having 20% down to put down on a house isn't a measure of financial responsibility..

I think there are exceptions on both sides of the argument.

In short: listen to media artist and save for 20% down on a house. In the mean time, I will let you savers know when I have a vacancy in one of my rooms in one of my houses.

Well, being given cash is different from actually saving cash yourself. Regardless, it reminds me of a story about how a 40-year-old couple would live at home and brag about owning a brand new BMW

[carogers86]

MediaArtist does his homework! He is very correct on housing market in Sacramento. In fact, I live in a little city just south called Elk Grove. You will drool over what a $350k house looks like. Being a first time home buyer, I was shocked when I had to insure my house for $450K. I told the insurance company that I only bought it for $235k. They said the materials cost to rebuild my house to spec if it burned to the ground was $450k! That shows its possible to buy a house for less than it costs to build the thing!

Nuckin Futz!

So many Bay Area investors know a rental model like this only works in places like Sacramento. When looking at properties, I would put an offer down only to be beaten out by some Oakland resident who was walking around with $250k in their checkings and offered cash.

I feel FHA "levels" the field for a guy like me (26 and haven't had as long of a time to save up to compete against older more established, dual income individuals). Doesn't mean the program isn't immune to lemmings of the kind MediaArtist detests.

You can start by shoring up your credit. Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.