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Comment by postingawayonhn | Hacker News Reader

> For example, FHA offering 5% down payments instead of a standard 20%, just means every first time buyer can now pay 15% more (approximately) for a house.

Assuming they had the same deposit available they would theoretically be able to pay 300% more. Of course they probably wouldn't be able to demonstrate their ability to service a loan that large.

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They're not gonna pay 300% because they wouldn't be able to pay even the first monthly mortgage payment. Buyers aren't stupid -- they'll take advantage of low money down but they won't get themselves into a mortgage that they literally already can't afford the payment on from day one. No, the way mortgage problems typically happen is that the payments are initially affordable but then something changes (typically job loss).

Waves from 2005 where people literally could not afford the loan they just were given. I knew a couple of people who just planned on flipping so didn’t worry about the inability to service the loan.

People will absolutely try to take out mortgages they can't afford. Post 2008 rules make giving a mortgage to someone who can't afford the first month nearly impossible, but you can still get a mortgage that will crush you without a job loss.

Mortgage repayments are much cheaper than renting, at least where I am in London

Or, if they had the income to service a 4x loan, they could quickly save additional down payment towards an 80%LTV loan.

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