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  • From: Lisa Perry <lkvp AT floydva.net>
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] Bush zero-down payment on houses
  • Date: Tue, 05 Oct 2004 12:19:05 -0400

Tvoivozhd contributed:

Zero cash-down would be fine if sweat equity were the real down-payment---providing a real equity cushion, and an enormously beneficial side-effect of teaching construction skills to home-owners---an economic flywheel to sustain them during periods in which their regular jobs disappear.

The only time I see sweat equity or similar, is when the client wishes to build a home and purchased the land a few years back. Quite honestly, lenders don't care much about sweat equity, they'd rather have the client mortgaged to the hilt.

The Boston Globe <http://www.boston.com/news/globe/>
Zero-down mortgage initiative by Bush is hit
Budget office says plan likely to spur more loan defaults
By Chris Reidy, Globe Staff | October 5, 2004

Bush contends that reducing the required 3 percent down in the Federal Housing Administration mortgage program to zero down would help 150,000 first-time buyers in the first year. Homeownership rates are now about 69 percent nationwide, compared to about 64 percent 10 years ago. The FHA insures many private-lender home loans.

Rural Development (RD), a division of FmHA, has offered 100% loans with the Seller able to pay up to 6% of closing costs for years. The only difference in the FHA and RD loan is that FHA will still finance doublewides and RD will not. With RD, you can finance up to the appraised value, which in some cases is slightly higher than the sales price, and allows the buyer to finance some of the closing costs if the seller is not. Rural Development loans are available in rural areas, but you can get one in areas that are somewhat sububuran in nature. The definition of rural is pretty flexible from what I have seen. If you don't qualify for FHA, there are plenty of other 100% loans, and 100% loans for those that live in large cities as well. If a first-time homebuyer needs a loan, one already exists to meet their needs.

An unanswered question remains, he acknowledged: "We have no experience of how these loans will perform when the market is weak."

Oh really? I wonder if he can take a wild guess.

Lisa
...feeling overly cynical this morning but loving the recent polls....






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