What are people doing that entered a contract w/ 10% down?

what do you mean? is there some new thing that is happening?

90% financing is not an option at the moment or foreseeable future.

Why isnt 90% financing available?? We can still do 90% straight financing up to 729,750 on 30 year fixed with NO PMI. Or 95% up to 650k. AND we can do free 9 month locks on ARMS. sunny_hong@countrywide.com

I thought the only way to avoid PMI is with atleast 20% down.

Correct, but you can finance PMI into your rate. Your rate would be .125 or .25% higher but it beats the higher PMI payments. Today, a 90%, 729k loan with no pmi will be 6.875%.

Sorry, I should have said loans over 900,000.

How can you say "with NO PMI" when you mean WITH PMI? You are the cause of the problem.

he is saying it is an alternative to PMI, so it it NOT PMI

Wow, this conversation got off topic really quickly. Does anyone know anything about the answer to the actual question? Presumably there's a bunch of people who were counting on financing in very different conditions than exist today. Does anyone know if this is happening with any frequency, and what people are doing?

It is still PMI, its actually PMI plus interest and you save money upfront but pay a boatload more over the life of the loan. Typical Mortgage Broker Babble.

Chase wouldn't quote me a 10%-down mortgage online, and eloan said this for a $1,000,000 property with 10% down:

"There are no loans available based on the criteria you entered. However, we do have loans available for a loan amount of $795,000.00. Shown below are all the loans corresponding to your general criteria with the revised loan amount:"

Do I say you can't get one? Nope. Am I reporting what is verifiable? Yup.

And shong is saying all sorts of things that people shouldn't pay attention to. He's not a loan officer, he's a loan salesman. A dying breed.

Get out of that contract if you can. Do you have a mortgage contingency?

I don't have a contract, street_easy, if you're referring to me. I just searched for rates.

I think that street_easy is responding to the original question, not you steve -- but I may be wrong.
I do agree with street_easy though. If you have a mortgage contingency. If not, it may be tough -- your deposit with a new construction is not a down payment, it's a deposit. They don't care whether or not you can get a loan - that's why many of them do not have mortgage contingencies.

I actually find it a bit unethical that some places advertise as "you can own for just x% down" when really it means you can have a contract for x% down. I just saw an ad for Arris lofts claiming that you can own a condo for just 5% down. Are they smoking crack or something?

It ISNT PMI. So, would you rather pay the mortgage at a .125-.25 higher rate or just pay PMI? (PMI payments are higher than the difference in interest rate). Its a no brainer and for those who want 90% financing these are the options, not mortgage broker babble. You have any better options for someone who can afford only 10% down and cant get out of a mortgage? steve, dont hate. And do you get paid to do this?

Good point with the Aris lofts. Because the banks are such a mess and requireing 20% down (on larger loans), Aris is offering developer financing. Very smart on their part.

I am waiting buyers who put a 10% deposit down thinking they would get 90% financing now only able to get 80% that don't have the other 10%. I would think there would be some decent deals coming onto the market.

I did a check and called Countrywide yesterday. For larger loans (975,000) there is no 90% financing.

How many signed contracts do you guy/gals think the buyer planed to just put 10% for the purchase. I have been saying this for the last 4 months. I people can get their money back. The only alternative is come up with more money.

lajeep405, no one that I could find would quote a rate for 90% financing online. Maybe you can get it if you have enough money in the bank to make up the difference, but in general it would be a customized product.

And dumb to take out that much leverage, but that's just a personal viewpoint.

shong is correct, you can pay an increased interest rate to avoid PMI, and it's not PMI. According to bankrate.com, however, "The rate increases generally range from .75 percent to 1 percent, depending on the down payment. The advantage is that mortgage interest is tax deductible."

You can also take out an 80-10-10 loan, to which Suze Orman would say, "Denied! Denied! Denied!"

It's time for people to realize that stretching like this to buy a property is dumb, and unnecessary. Rent until you have a proper down payment and then if you can afford it, buy it. With a mortgage equal to the time you plan to live there. So if you plan on living there for 7 years, take out a 7-year ARM. If you plan on living there for 20, take out a fixed-rate mortgage. Otherwise, the downside of an interest rate increase could be devastating, and you could lose everything. Never take out an ARM because you can afford the initial payments without being able to afford the maximum resets - it's foolish. This from someone who has an ARM.

Yea, we cant do 90% on anything over $729,750 loan amount. 810k purchase price max with 10% down. Rates increases for us are .125-.5% as PMI alternative depending on LTV and Fico.

So, shong, basically a Manhattan studio if you have stellar credit.

Also, not on co-ops I understand, since co-op loans are not covered under the new jumbo guidelines. C'est vrai?

When i first read the question, I thought it was asking are people walking away from 10% deposits under the theory prices were coming down more than 10%. Anyone hear of people doing that?

lorenzonyc, if no one can get a loan, what choice do you have?

and yes, though not in NYC, I have a friend w/ a contract in North Miami Beach who is contemplating doing just that. "Good money after bad," he says.

Yep, no Coops on the higher conforming limits.

Steve, why are you "stretching" if you don't have 20% down? I can see why you might characterize people as "impatient" perhaps, but if you have plenty of income relative to the mortgage cost and are doing a 30-year fixed mortgage but happen to only have 10% in assets you want to use as a downpayment, why is this inherently more of a stretch than someone with 20% but less income relative to the mortgage they're trying to take out?

Sidenote: I'm not sure the Arris lofts ad is as misleading as people are suggesting here. There was something on the ad that indicated that this applied if you were using developer-subsidized financing or something like that, so maybe they've worked something out with a bank to make it possible.

jordyn, I still find it unethical that places imply that you should buy a place for less than 20% down - whether or not they find a way to get you the financing.

And the 5% Arris thing...that would be targeting 1 of 2 types people.

a) An investor - and if you are an investor and actually planning on investing in this climate, then you are "smoking crack" as I said before. with 5% down, you'll never make back your payments in rent and you certainly are not goign to flip it for much more than the purchase price after closing costs etc.

b) someone who doesn't have more thna 5% to put down - everything that is left to sell at Arris is over $800,000 - ad that's for an 800sf studio loft. So, payments of close to $7,000 after including monthly costs...for someone who doesn't even have 5% to put down.

so, as I said, I find that "unethical" not "misleading" - and I'll stand by that.

Arris is just an example, I would take issue with a place saying that you can own for only 10% down. That's what's gotten us into this mess in the first place.

...and to your other point about "why would you be stretching for 20% down if you don't want to use assets" - I'm sure that Steve can answer for himself but this is not the time of interest only loans where you can buy a place for nothing and make $20,000 in a few months.

There is no reason to be buying a place for less than 20% down becasue unless you are buying a "home" then you should not be buying anything. Making money in the stock market while building up negative equity in your home...I don't know about that. Why not just keep it all in the stock market and rent a place in that case.

10% down is 9x leverage; 20% is 4x leverage. That's a huge difference, and leverage works both ways. Let's say the property prices rise 10%, and you put down 10%: you've gained 100% of your initial investment. Let's say property prices fall 10%, and you've put down 10%: you've lost your entire investment.

That's why banks are requiring higher down payments now. If you only put down 10% and property prices fall 11%, you're upside-down, or underwater, on your mortgage: you owe more than it's worth. Therefore, why continue to pay it, when you have nothing to lose by walking away, and everything to gain (admittedly including bad credit)?

If you have 20% down and only want to put 10% down, that's one thing. But most people - not all - put down 10% because they don't have 20%, and don't realize the risk they're running by doing that.

I've said before, I'll say again: the only people who benefited from these exotic, high risk mortgages were the first ones to use them. Everyone else found themselves faced with higher property prices, which offset the gain obtained from the leverage. Now the only way for people to continue to afford housing at these prices is to continue expanding leverage forever, which is NOT happening. The opposite is happening.

A sophisticated investor knows not to look at the potential upside, but rather at the potential downside: what can I lose? The less of a down payment you make, the greater your loss as a percentage of your assets.

I understand how leverage works, and I understand your argument about why banks might not want to let you do it (they're more exposed), but I still don't consider it stretching to put only 10% down if you can otherwise afford the mortgage. As you point out yourself, unlike usual leveraged investments mortgages are no-recourse loans so even if you end up substantially underwater the rest of your wealth can't be wiped out by an investment in your home.

Put another way: if I put $100K down on a $1M home and it falls to $900K in value, I've lost $100K. If I put $200K down and it falls to $900K, I've still lost $100K. As a percentage of my initial investment I've lost more, but in absolute terms I've lost an identical amount either way. If it falls to $800K, I've still only lost $100K if I put $100K down, but I've lost $200K if I put $200K down. In a sense, the non-recourse nature of mortgages makes the downside smaller for the buyer with a smaller downpayment.

Moreover, unlike most leveraged investments there's no notion of a margin call. You can continue to live in your house and pay your payments even if your equity is completely wiped out temporarily. If the market comes back up, you get your equity back. The closest thing to a margin call is if you have to move or sell the house for some unrelated reason, but it's much less risky than the typical use of 10x leverage.

Where do you get 10x leverage? You can get 100x leverage in the currency market, but in the stock market for your average investor it's 2x or 3x leverage. To buy on margin you usually require 50% of the amount borrowed in marginable assets, and to avoid a margin call it's 30%. At least it is on my accounts.

Where do you get that mortgages are "no recourse" loans? Of course there's recourse - nothing stops a bank from coming after you personally to make up for any loss they might incur after selling a foreclosed property. Most of the time they don't because if you're foreclosed on, you usually don't have any money so why bother, but they can. Even if you quitclaim to a trust, the note is in your personal name secured by the property, and quitclaiming does not remove your personal liability or the lien on the property. Otherwise, that's what everyone would do. Remember, liens are inherited.

If you understand how leverage works, and can make the payments on 10% down, and aren't stretching yourself with exotic mortgages, go ahead, use the product. My point was that most people don't understand leverage, don't understand the excess risk, and put 10% down because they're using every last penny they have to buy a house that they can't afford. That might not be you - it is most people.

Steve--I had to go check and you're right about recourse on mortgages in New York. In many states, payment money mortgages are non-recourse, but in New York that appears not to be the case.

I'll still make the point that the lack of a margin call makes a mortgage a lot less risky than traditional leverage.

I still don't understand how someone that uses their last pennies to pay a 10% downpayment is stretching more than someone that uses their last pennies to pay a 20% downpayment, but I think the main points have been hashed out.

Most states don't even have mortgages in the traditional sense, where the mortgagor retains title to the property, and a lien is recorded on it. Those states are called "Title Theory" states where title remains in the lender's name in trust until the note is paid. Therefore, if you default on your mortgage, you lose the right to be the trust beneficiary. Since it's a trust, however, they can't go after you for payment. That's the lender's downside; the upside is it makes foreclosure easy, and often nonjudicial. It's explained here:

http://www.foreclosure.com/statelaw_CA.html

Anyone who uses their last pennies for a down payment is stretching. No argument from me. Just if you're putting down 20% you're stretching less, since you have more money, and you're taking on less risk as measured by LTV. That's why banks charge you more for 10% down.

shong, you're web link is with Countrywide. Enough said.

I think this is a big problem. The 10% piggy-back HELOC is gone, which used to protect NYC condo buyers against PMI. Now, PMI isn't even available for jumbo purchasers. In 2001, it was. You could get a jumbo loan with 10% down and PMI. I haven't been hearing of this at all.

10% down wasn't always such a stretch. If after-tax costs were equal to rent, and one had some resouces (typically family) available for a couple of months payments if something went wrong, people could often weather some mild storm. Major storms, it might not matter if you had more than 20%

What's wrong with Countrywide? I just called a countrywide rep to verify what shong said on an 810k purchase price. The rep told me the same thing. If they can close the loan and lend the money what makes a countrywide dollar any different from Chase, or Citibank or Bank of America?