Reply #114: The OP may be fine

[pipoman]

in general, I think it is a terrible idea to borrow 100%. And I disagree as to the cause of the current issues.

The change in lending standards which made 100% loans the norm, completely changed the way people bought homes. There suddenly was no impediment for young first time buyers to start in their real estate market by buying their "dream house". For decades before the deregulation and lowering of mortgage standards first time buyers particularly were forced into purchasing smaller homes in older neighborhoods, often investing in improvements, building equity for a period of time, then selling their "starter home" cashing in their equity to make the larger down payment for the nicer property. This period also served to solidify the younger buyers financial status and their job time making catastrophic loss of income less likely. This system kept the housing market in check, toward the end of the housing bubble new homes were selling at an unprecedented rate against existing property.

There used to be a show on HGTV which each episode followed the purchase of a first home by a young person or couple. It demonstrated this week after week and I knew that we were headed for trouble (it didn't take a Pulitzer economist to see). Every week a new young buyer(s) would tell of their entry level job as they were driving their new car(s) around looking at $200k to $500k real estate. It would come time for the closing and the host would explain that the buyer had no down payment and was hoping to finance enough additional to buy all new stainless appliances, living room furniture and maybe a new entertainment center. Then off to the closing they would go in their new cars, finance 80% for 40 years with a 5 year interest only deferment, and 20% which was actually 25% to enable the purchase of all of the new amenities desired. The payment totaled 50% of their gross when you looked at PITI payments. There has never been another time in history that I am aware of that lending practices have been so lax for such a long period. This is the basis of our current housing/mortgage problem IMHO.