Interesting article today in WSJ:

Banks Push Home Buyers to Put Down More Cash

http://online.wsj.com/article/SB1000142405274870331290457614...

Gee, when people had to put 20% down, they didn't default so much? Really?

For one, when you have no skin in the game, what possible motivation do you have to hold onto a house that loses value? If you put money into the house, you at least have some motivation to hold onto it.

Regionally, it has been interesting though. As much as "owning was cheaper than renting" for us, when we bought, that wasn't the case in the bubble, where we ended up.

As such, I couldn't see any logic whatsoever to home purchase choices.

IT was literally like, "I am renting a house for $1k per month, I want to buy a house, but I could never afford to save the down payment. The mortgage is $3k/month, but I better buy before I am priced out forever."

This would be the average example.

What I could never get is how on earth you could afford a $3k/month house payment if you couldn't even save up a down payment on $1k/month rent (save the difference for a few years? Hello????)

I don't get it.

Clearly, the math made no sense, and almost everyone I know is back to renting again.

I suppose I see the 20% down requirement would have kept home prices from skytocketing. No one could have played the game.

As such, putting back that requirement will definitely lower home prices. I say, "Good!," even as a homeowner. Because all I See is another bubble forming right where the last one left off. For the short term it hurts. So be it. For the long run, I would like to avoid this mess again and would prefer my neighbors had more of a chance of actually being able to keep their houses.

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On a somewhat related, my young, naive, sister has just bought another home (it's her third).

Her M.O. is to put every dime towards the mortgage, and at some point her goal was to pay off her home lightning fast. Her last home, bought with her current husband, was a modest townhome. Smart girl!

Oh sure, I Was definitely the same way at her age. Well, sort of, but not quite so extreme. She literally doesn't save much or put much of anything into retirement. She's got the rest of her life for that, right?

Needless to say, my parents were telling me a lot of the details of her recent home purchase (I didn't even ask) and I Was rather flabbergasted.

They put 0% down.

?????????????

I have no idea what is up with that. Except that she quit her job before the last home even closed escrow, and has been out of work for 6 months. Heck, they may have spent all the equity. Lost money on the home, and no job for 6 months? I suppose maybe they burned through it - that could be a possibility. Her husband hasn't worked in ages, either.

Or, the experience made her appreciate the importance of having a decent savings cushion? Maybe?

That said, seems so one extreme to the other. The house they bought is pretty extravagant for their income.

They don't have steady jobs, make minimum wage, and have a mortgage that rivals my own, at this point. It doesn't sound very smart. I hope it works out, for their sake, but it just doesn't sound good. Another 0% down statistic, perhaps. I don't see much change in the lending industry. Where is everyone getting thse zero down loans??? (In this case it is military, but my mortgage broker friend thinks we should buy a rental property - he tells me we don't need any cash down - The loans seem to be abundandt!)