3.5% down payment

It amazes me that after the incredible housing crises, that FHA loans still require as little as 3.5% down payment.  On top of that, buyers are often demanding $3000-5000 cash back at closing, essentially making their out of pocket expense $0.  In the past few months of our house on the market, we've had two offers like this.  Both have requested sizable amounts of cash back at closing.  While I understand that they may have good credit, the continuing drop in home values will only continue to put individuals into a hole they cannot escape if they are forced to sell quickly.  This will inevitably lead to more foreclosures and further price drops.  All because our government backs these loans.  These guarantees are what put our housing market into the mess its in.


  1. My thoughts exactly.

    And I always scowl when I hear reporting about how the housing starts have not picked up yet. Are you kidding me? Why would anyone build a house right now (unless you have a good chunk of change saved away and can pay a lot up front)? I'd be really surprised if housing isn't the very last sector of the economy to recover.

    I may buy in the next couple of years, but it will be a low-cost unit like a condo, something that would be less than rent and which I won't owe much money on.

  2. I actually did quite a bit of research just on this topic. I'm afraid the data simply does not back up your assertion. There were many things that got us into the housing mess and it's difficult to point to one as the primary cause. None of them, however, were nonconforming loans. Nothing I found was able to back up the argument that there was a causal link between nonconforming loans and defaults on those loans. I'd be happy to relay the sources if you're interested in pursuing it yourself.

  3. Yes, mtnrunner2, it will be a while before that sector of the economy recovers. Good luck with purchasing a condo. There are many low priced but excellent properties available right now.

    Curtis, I've read a lot on this topic as well and I see the evidence EVERYWHERE. In fact, I find it incredible that you did not find ANY evidence of it.

  4. I just emailed you something. It's too long to make a comment or even my own blog post. And I'll also be submitting it at some point. Anyways . . . the first subsection deals with this specific issue and includes sources in case you're interested.

  5. Well I just reread it and I don't get to 3.5% down as much as I do alternative credit assessment. But at least you've got my sources now. :)