Is It Just Me, Or Does This Sound Insane?

[Maine farmer]

I Watched some television while I was ill, and saw an advertisement for H.U.D backed mortgages where you didn't need to have a down payment, and you didn't have to have your property appraised!  In other words, you can get a loan with no money for more than your property is worth, and you can get it both quick and easily!

 

How is that a good idea?

 

Have we learned nothing from recent history?

[CraigD]

That does sound crazy.

 

If I were to offer you a contract stating

If you give me $x,

I will repay you $ x + interest over a period of y months,

-or-

I will default on the repayment, in which case I will give you a z, a thing of unknown value.

you’d be foolish to take it. If you were willing to take it, I’d be foolish not to offer it, default, and give you the lowest value z I have.

 

The mortgage you describe sounds like this contact.

 

However, there’s a difference between what television adds promise, and what the agents and lenders to which they are meant to steer people will actually offer. And there’s a difference between what is actually shown in a TV add, and what we may see, especially if not paying close attention. I’d have to actually see the offer you describe to believe it really exists.

[billvon]

I Watched some television while I was ill, and saw an advertisement for H.U.D backed mortgages where you didn't need to have a down payment, and you didn't have to have your property appraised!  In other words, you can get a loan with no money for more than your property is worth, and you can get it both quick and easily!

 

How is that a good idea?

It's not a good idea if you are a bank.  It's a great idea if you're a responsible person and you want to buy a house.

[fahrquad]

Just before the housing crisis I was told by a mortgage agent that I could qualify for a mortgage for about double what I was looking to finance, but that I couldn't afford the payments.  I thought what was a ludicrous statement.  The type of loan you described sounds like either a "Jumbo Loan" or more likely a loan package where you take out a conventional mortgage and a home equity loan at the same time.  The home equity loan goes toward the down-payment on the conventional loan.  I personally believe that if you can't save the 10% down-payment then you should stay in your apartment (or more likely your mom's basement).  Yes, I stayed in my parents house until I was 25 and moved out into my own house, but I paid rent, serviced the cars, did the yard work, did my own laundry, and my own cooking.  I saved enough for the down-payment and the closing costs and had some left over for some cheap furniture.