Zero % down mortgages - will they ever learn?

[SnowBound]

If you had $50k, and a 2.5% mortgage interest rate, would you:
A. Invest the $50k
or
B. Pay down the mortgage?

Personally, I'm investing it. And if I'm not going to put $50k towards the mortgage after I get it, because the rate is low, then it stands to reason that I'd similarly not want to put $50k towards the mortgage just to get it. Thus, if offered a mortgage without PMI that I could put 0% down on for the same rate, I'm putting 0% down every time. Thank you VA loans...

Clearly see point made. My father followed the same advice. When he unexpectedly passed, left D Step Mom with $150,000 in mortgage debt. The grief of loss is great, why add to it with a mortgage that can’t be paid off?

 

[Red Badger]

Remembering an article in 2010/2011. When people where faced with only being able to make house / car / student loan / credit card payment: Car payments overwhelmingly got paid first. Thinking credit cards where second in line? That had never happened before and caught the mortgage industry completely by surprise. A huge number mortgages where NOT paid on time, probably something that the Industry calculated was statistically impossible!

Spot on. I worked as a volunteer with a BofA somebody at the start of the meltdown. They were stunned and flatfooted as cars and credit card payments rolled in like clockwork...and mortgages went unmet month over month. The lenders had no plan, because, as you mention, they had never seen anything remotely like this.

 

[HFWR]

Any good vacuum cleaner salesman knows to make the sale NOW!

 

[RunningBum]

Spot on. I worked as a volunteer with a BofA somebody at the start of the meltdown. They were stunned and flatfooted as cars and credit card payments rolled in like clockwork...and mortgages went unmet month over month. The lenders had no plan, because, as you mention, they had never seen anything remotely like this.

There was a funny commercial I heard on the radio probably 30 years ago. I think it was a debt consolidation service or something like that. I don't remember the exact setup but a couple were trying to decide which bills to pay, and all the bills had squeaky voices saying "Pay me first!", "No, pay me first!", "No, me!"

Then a deep voice said "NO, I'LL BE PAID FIRST."

"Who are you? Who are you?" all the other bills squeaked.

"I'M THE MORTGAGE."

Then the other bills started saying "Pay me next, pay me next!"

It was pretty funny, and indicative of the debt priority thought process back then.

At some point in that last downturn people stopped thinking of the mortgage as the bill that absolutely had to be paid, and realized they had to be mobile in order to keep or find work, and could live in their car, so the car got paid first. And they had to be able to buy food and stuff, so the credit card had to be kept alive. If the house was under water anyway, why keep paying on it? So they'd live in it for free until the eviction notice came, then leave the keys on the counter and walk out.

The loan industry was slower in figuring out that shift, or at least never thought it'd get to that point. House prices never drop, right? So who would walk away from a house with equity?

 

[Bigdawg]

although the 0% down is a problem, the bigger problem was and is the 125% ltv and the no employment verification loans. I bought and owned in SoCal in 2002-2018. Many people bought a 300K home and were handed a check for 75K(minus a few fees) at closing. Some did that deal three to fours times w/out ever making one mortgage payment. Walked away with a ton of cash and a bad credit score. I waited out the storm and sold for a good profit last May.