The real problem is more on the income/assets/credit side than the down payment side. Stated income loans, etc, and just general overvaluation caused by easy money.
Should people have “skin” in the game? Absolutetly. Does it have to be a full 20%? Maybe, maybe not. Traditional FHA loans had low overall losses until recently, when they started giving them to people who really didn’t qualify, hoping they could be swept under the rug when they were packaged and sold.
With all this posting, including mine, I don’t beleive these guidelines are in effect. They’ve been talking about this for several years. I do know they’ve instituted the limit on what the seller can “pay” in closing costs. It used to be 5%, or maybe a little more, can’t remember. Now it’s $3,000.
I meant “stated income” when I said “B” paper loans. Many people were buying homes who should not have been buying them. Those people were weeded out about 2 years ago. Up until we got out of the biz in early 2011 a buyer had to have a 680 credit score, minumum 3 1/2% down and ratio no more than 50%.
The guidelines have been moving constantly since 2007. Then you could buy with a 400 credit score with seller paid down payment and seller paid closing costs. Basically no money down if you had a job. Then it moved to 580. Then 620 with 3 1/2% down payment. And now it’s up to 680 (unless it’s gone up again) and a maximum of 3% seller “contribution”.
Personally I see many more people walking away. That means banks crashing and builders going under. There’s no fair and easy way out of this.