Meanwhile, back on Main Street (Part II)...

There is another piece of this that I haven't seen discussed much and that is - do these potential buyers really have good credit? I have seen a lot of discussion about how the ratings of bonds have been deemed so unreliable as to be irrelevant. Right now, I think FICO scores have the same kind of credibility problem but I haven't heard mention of this.

capitalism is a system that consists of nothing but conflict of interests between the participants.

the game naturally favors the already powerful.

Credit scores are a good proxy for risk on small amounts of debt (CC's, cars etc.) However, once you are talking about hundreds of thousands of dollars credit scores mean less and less. There are other ways of establishing the character of the borrower, than just a credit score.

Down payments are vital in my mind for two reasons. They show a responsible habit of saving and cushion the bank against an early foreclosure. The first is the most important to me, because home buyers need to be responsible and save if they are going to properly maintain the house. They also need to have reserves to make it through a rough patch in life. Since the loan is 30 years long, it should be expected that the borrower will come on tough times at some point.

In short, if you can't save 3.5% for a FHA loan you have no business purchasing a home.

jordanT,

who died and made you the jury and the judge?

i would say jordanT makes a reasonable point even if you perhaps disagree with the specific numbers.