I’ve lived in my apartment for 4 1\/2 years now and recently, things have started to get a little more crowded (filed under girlfriend, cross-referenced with dog).\u00a0 Actually, there are many apartments in my building with a larger occupancy than mine (including the upstairs neighbors – 2 adults & 2 kids) so it’s not all that bad – at all.<\/p>\n
But, being Americans, it’s in our nature to covet more.<\/p>\n
I decided to just see what our options are, and to contact my real estate agent who helped me with my current place and I was really shocked by the change in the landscape.<\/p>\n
Now, I know all about what’s been going on in the world for the last year, so it’s not that this comes out of the blue.\u00a0 What I didn’t appreciate was how much it changed the whole dynamics of home buying.\u00a0 See, when I bought my apartment, I was able to do so with a very sketchy loan scenario in many ways:<\/p>\n
In many ways I played it much safer than what was being offered – I took the 7 year ARM, I bought a cheaper place, and importantly, I’ve always made larger payments than called for, refusing to pay only the interest portion of my loan.<\/p>\n
So while I figured things would have tightened up in the past couple of years, I underestimated by just how much.<\/p>\n
Talking to my real estate agent (and followed up by my mortgage broker) the scenario today is much more straightforward: put 20% down.\u00a0 Anything less requires mortgage insurance.<\/p>\n
Wow.\u00a0 That’s a lot of up-front payment, especially here in San Francisco.<\/p>\n
I was expecting the disappearance of the interest-only loans.\u00a0 I was expecting tighter standards of credit worthiness.\u00a0 I was expecting more realistic alignment of loan amount to income.\u00a0 Each of these I was prepared for.<\/p>\n
What I wasn’t expecting was a big hunk of cash being needed.<\/p>\n
I see where this makes sense: this puts a LOT more risk into the hands of the borrowers.\u00a0 If my apartment were worth 500,000 (it’s not), that would mean that when I bought, I would have had to put out 25,000 as a down payment.\u00a0 If I default on my loan and walk, I’m out 25000.\u00a0 With 20% down, that number changes to 100,000 – something I’d be a lot less likely to walk away from (and if I did, I’d feel a much worse sting).\u00a0 Also, if the bank were forced to sell that property at a loss, there’s a much smaller risk that they’d lose significant value – since they’d be able to sell it at 80% of its value without losing a cent (since I would have already lost the first 20% of value).<\/p>\n
This makes total sense from an industry that’s reeling from too much risk exposure.\u00a0 But it’s really tough for folks like me who hadn’t really thought about the need to save up a 20% down payment.\u00a0 It also really hurts sellers (or potential sellers) who won’t benefit from the same number of potential buyers.\u00a0 No wonder we’re just not seeing that many for sales these days.<\/p>\n
So, a little furniture rearranging, maybe a little paint here and there, and my apartment should be good for a little while longer.<\/p>\n","protected":false},"excerpt":{"rendered":"
I’ve lived in my apartment for 4 1\/2 years now and recently, things have started to get a little more crowded (filed under girlfriend, cross-referenced with dog).\u00a0 Actually, there are many apartments in my building with a larger occupancy than mine (including the upstairs neighbors – 2 adults & 2 kids) so it’s not all … <\/p>\n