Another gem from Yahoo

[Jags4186]

https://www.yahoo.com/homes/news/one-couple-bought-a-home-with-$8K-down-055708589.html

tl:dr

Broke ass couple buys $300000 house and are congratulated.


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[centwise]

Nice one! "We had some money saved for the down payment, but not as much as we would have liked," she says.

Here's how they saved: Their regular incomes add up $67,500 a year. By working second jobs (both of them) AND saving their tax refunds, coupled with "good budgeting", they were able to save a grand total of $5000 over the course of a year! Yee-ees, this couple is ready for home ownership! not.

Compare that to their PMI payments of $3000/year (i.e., mortgage insurance that they have to pay because they put less than 20% down). So, PMI alone is equal to 60% of everything they were able to put away when they were trying to save for a down payment? And then they both quit their second jobs when they moved into to new house. Yikes.

Of course, this all happened a couple of years ago; the article goes on to say that they eventually did reach 20% equity, and then refi'd to get rid of PMI, so maybe things will work out for them. But it sure looked like a risky move, initially.

[BigRed]

Wow, that is just an advertisement saying, "Go buy a house, doesn't matter if you have anything saved, you'll be ok."  The only possible way they reached 20% equity in two years is that the value of their home must have risen extremely fast, because 2 years of a 30 year mortgage doesn't get you any significant principle paid off.  And I think we can assume they weren't paying extra on their mortgage.

I had to double check just to make sure the date on the article isn't 2006, because this is pretty much exactly what was going on then, right?

[Angie55]

Houses in Denver have gone up 10-15% per year for the past 3 years. So they were only able to refinance because of the value of the house not because they were aggressively paying down the mortgage (obviously....)

Maybe they will foreclose just after I spend 2 years responsibly saving my downpayment so I can buy it!

[MgoSam]

"By the time they were ready to close on a mortgage, Brunkow says they ended up borrowing about $3,000 from a family member in order to make the down payment, which they successfully paid back in two years."

"Just about $5,000 saved over the course of a year, mostly as a result of good budgeting and saving their tax returns, she explains."

[rocksinmyhead]

Surprisingly, the first few comments on the article are awesome.

[Daniel]

Sometimes I look at my own down-payment fund, and think to myself, "The government (FHA) would lend me 1.1 million dollars, they must be insane." Actually I think my income would cap the actual loan amount lower, but 3.5% is insanely low.

[Jags4186]

I just don't get how they are affording to make the house payments!

If they had to each take on a 2nd job AND use their tax refund to save $5,000 in 1 year...and they quit their 2nd jobs once they got the $5k...were they paying more than their house payment/property taxes in rent?

The numbers just don't make any sense to me!

[commodore perry]

ugh! didn't learn anything in the recession I guess.

[NoraLenderbee]

The comments are about 99 to 1 against them.

[sleepyguy]

Actually from purely a mortgage perspective they aren't doing too for the general public.

$67.6K annual salary

$289k mortgage.

so about 4.3x debt to income.  Considering they (banks) recommend 2.5-3.5x it's not too far off.  I personally no comfortable anything over 2.5x

our first house (young and hopeful) we paid $265k, with 225k on mortgage... at the time we were barely at 80k income... so even we weren't that far off, we were a bit younger at 23.

Here's hoping their income levels rise and they keep their lifestyle spending stays neutral.  It's gonna be super tight if it isn't already.

[socaso]

I'm so glad someone posted this! I read it on Yahoo yesterday and couldn't figure out where the angle was. Totally commonplace story about a couple who used an FHA loan. The most disturbing part was that they couldn't scrape together $8k in a year.

[arebelspy]

My favorite part:

Plus, she adds that both of them worked a second serving job at a restaurant on Saturdays to help put away extra money. They both worked there up until they moved into their new home.

Heh, they needed a second job just to save up the small down payment, but then once they have the large mortgage bill to pay they quit? 

When articles like this start coming up, you know we're in the growing bubble phase exuberance phase of the cycle.

[chasesfish]

I hope someone in the comments referred them to a bankruptcy attorney


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[Seņora Savings]

It's amazing how many people think "my budget is the maximum amount anyone will lend me".  Also, a three bedroom for two people!  I was just looking around our one bedroom w/office and basking in my luxury.