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Author: mew5280 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127523  
Subject: Maybe a silly question... Date: 9/10/2005 7:04 PM
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Why is it so easy to go into a new home builder and get into a house without putting any money down? Especially in hot markets? I've seen this around my city.

I'm in a situation where I have no equity in my home and I want to keep it as a rental. Reason being... I bought it single, now I'm married with family. It's not right, too small, not the right neighborhood anymore BUT it is in a neighborhood that is constantly increasing in value, surrounded by lots of new building and city renovation. I have no doubt it will continue to rise in value and we'll have equity again (refinanced and took money out after having an inaccurate appraisal).

Anyway, we can get right into a new home, nothing fancy, just bigger house with smaller yard/upkeep and new, with nothing down.

Besides mortgage insurance and having two mortages, what is the downside to doing this if our incomes will afford it?

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90245 of 127523
Subject: Re: Maybe a silly question... Date: 9/10/2005 8:16 PM
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Hi mew,

Why is it so easy to go into a new home builder and get into a house without putting any money down? Especially in hot markets? I've seen this around my city.

Why would you think it would make LESS sense in hot markets?

As to "why is it so easy," it's simply because your finances and credit make you a worthy credit risk (which matches what you say about your affordability, below.)

Besides mortgage insurance and having two mortages, what is the downside to doing this if our incomes will afford it?

If you split your purchase financing into a combo strategy, you won't even have PMI as a downside.

OTHERWISE... you may be able to imagine downsides to keeping the previous home if the prevailing rents don't cashflow the carrying costs... but that's a business decision you'll have to face in any case.

All in all... sounds like you're in a good position. You've likely busted arse to get yourself there... no need to self-doubt, really, there's nothing wrong I can see.

All the best!
Dave Donhoff
National Mortgage Banker/Broker

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