How Long Will It Take You To Save Up For A Down Payment at 20% Down? Dallas Real Estate News

Share News:

Great article in this week’s TIME Magazine, slim as it is, showing the difference in the 10% and 20% down payment model. Subscription required online, page 17 if you want to skim while at the check-out line.

As you may know, the Feds (Dodd-Frank) want to increase home buyer’s “skin in the game”, requiring higher down payment percentages. Time charts how long it would take certain professions to save up for 10% down versus 20% down. A lawyer would take about 7 years to save up for a 20% down payment, whereas they could buy a home in about 4 years if they only put down 10%. Someone like a residential construction worker — what do they earn? $48,000ish? —  would probably never end up owning a home unless he saved for 20 years for 20% down, whereas he could get a home in 12 years at only 10% down. Let’s look at teachers: 15 years to save up for that 20% down payment, 9 for 10% down. Time figured average home prices. The article also says consumer advocates and banks BOTH agree banks would raise rates to cover costs, and borrowers would basically be spending decades saving up enough money to qualify for a mortgage. Also, while they are saving that money, they would not be spending. My point: requiring 20% down is a disaster for our already ailing economy. My bigger point: I understand zero percent down and way easy money was bad and got us in this mess (thank you, Mr. Frank, thank you, Wall Street) but going to 20% is way too severe and would maim the real estate market. And the economy.

When I mentioned this story to Robbie Briggs yesterday, he had a good point: homeowners might resort to owner financing. But you might keep this in mind when you are listening to the candidates’ BS in the next few months: ask them — what would you do to get the housing market back on track?

mm

Candy Evans

A real estate muckraker, Candy Evans is one of the nation’s leading real estate reporters. She is also the North Texas real estate editor for Forbes.com, CultureMap Dallas, Modern Luxury Dallas, & the Katy Trail Weekly. Candy has written for Joel Kotkin’s The New Geography, Inman Real Estate News, plus a host of national sites. Constantly breaking celebrity real estate news, she scooped former president George W. Bush's Dallas home in 2008. She is the founder and publisher of her signature CandysDirt.com, and SecondShelters.com, devoted to the vacation home market. Her verticals have won many awards, including Best Blog by the venerable National Association of Real Estate Editors, one of the nation’s oldest and most prestigious journalism associations. Candy holds an active Texas real estate license but does not sell. She is on the Board of Directors of Braemar Hotels & Resorts (BHR).

Reader Interactions

Comments

  1. Will Gray says

    Sorry Candy, you forgot to add to Mr. Frank and Wall Street. Thank you appraisers for not doing your job, thank you unscrupulous mortgage brokers lying on paperwork and/or to clients, thank you realtors for happily pumping the bubble, thank you borrowers for lying and/or living outside your means, thank you Alan Greenspan for seeing the bubble happening and ignoring it, thank you again Mr. Greenspan for saying that buyers should get ARMs instead of fixed rate mortgages, and thank you Republican lawmakers along with Senator Schumer for eviscerating the SEC. I know I left a few thank yous off…

    And thank you Candy for making a very good point about saving for 10% versus 20% down. Out here in California you need 25% for many loans right now, and it sure isn't helping the market!

  2. Will Gray says

    Sorry Candy, you forgot to add to Mr. Frank and Wall Street. Thank you appraisers for not doing your job, thank you unscrupulous mortgage brokers lying on paperwork and/or to clients, thank you realtors for happily pumping the bubble, thank you borrowers for lying and/or living outside your means, thank you Alan Greenspan for seeing the bubble happening and ignoring it, thank you again Mr. Greenspan for saying that buyers should get ARMs instead of fixed rate mortgages, and thank you Republican lawmakers along with Senator Schumer for eviscerating the SEC. I know I left a few thank yous off…

    And thank you Candy for making a very good point about saving for 10% versus 20% down. Out here in California you need 25% for many loans right now, and it sure isn't helping the market!

  3. Classic Urban Homes says

    There are plenty of banks willing to close for less if you have good/excellent credit. We've done several recent one-time construction closes with 10% down. And that's across a wide range of price points – not just the high end.

    Per your follow-up on the Facebook page: If the Fed mandates 20%, I thing the answer would be obvious to anyone but the politicos involved in making the decision – it would be terrible. The combination of excess supply (on a national level) and a decreased demand (or ability to buy), would cause prices to stagnate.

    On the balance, I don't believe the lack of 20% down on the bad mortgages was nearly as bad as the banks (whether willing participants or not) loaning to people who clearly had no ability to repay no matter how much they put down.

    We should, and I have seen banks doing this recently, return to the days of rational underwriting. If someone has poor credit, that's a bigger risk for the bank and they should charge some combination of higher rates and asking for more down. If you are creditworthy, then it's less risky, and the bank should respond accordingly. It's Finance 101. Unfortunately, not everyone will be a homeowner, but that's ok.

  4. Classic Urban Homes says

    There are plenty of banks willing to close for less if you have good/excellent credit. We've done several recent one-time construction closes with 10% down. And that's across a wide range of price points – not just the high end.

    Per your follow-up on the Facebook page: If the Fed mandates 20%, I thing the answer would be obvious to anyone but the politicos involved in making the decision – it would be terrible. The combination of excess supply (on a national level) and a decreased demand (or ability to buy), would cause prices to stagnate.

    On the balance, I don't believe the lack of 20% down on the bad mortgages was nearly as bad as the banks (whether willing participants or not) loaning to people who clearly had no ability to repay no matter how much they put down.

    We should, and I have seen banks doing this recently, return to the days of rational underwriting. If someone has poor credit, that's a bigger risk for the bank and they should charge some combination of higher rates and asking for more down. If you are creditworthy, then it's less risky, and the bank should respond accordingly. It's Finance 101. Unfortunately, not everyone will be a homeowner, but that's ok.

Leave a Reply

Your email address will not be published. Required fields are marked *