Sunday, October 29, 2017

Home Without Down Payment

The Mill at Broadway in central Sacramento has begun offering mortgage loans with no down payments. The development that would have 800 to 1,000 homes occupies the former site of a lumber mill just south of Broadway near Interstate 5. No down payment? That sounds a lot like something that happened about a decade ago. The problem with "no down payment" mortgages is borrower has no skin in the game. If the market tanks and they owe $300,000 on a home that's only worth $150,000, then they will walk away from their loan. In the same time I would say these kinds of loans do their job by introducing more home buyers to the market and after holding the loan for a while they will have decent equity, sell, and start the cycle again.

The Mill at Broadway has low HOA fees around $115 per month. According to advertisements: "the HOA owns the fiber optic network and facilities that deliver Internet, phone and TV service to the community, meaning when you pay your Internet bill a portion goes right back to your HOA. This will allow the HOA fees to be reduced over time as more residents move in and subscribe to the fiber optic network services." That's sound great, but I really don't like HOAs. I realize that they're unavoidable when you're talking about condos or town homes, but when there are single family homes in the nearby neighborhood selling for a bit more money, but without the HOA fees, the single family homes begin to look much more attractive. Anyway I wonder what is included in HOA?

The neighborhood near The Mill at Broadway is not great, but not super dangerous. The owners will get higher levels of property crime, like car break-ins. The area could potentially change a lot over the next 10-15 years. There are proposals to tear out the nearby public housing which promotes concentrated poverty and replace it with a mix of housing and retail. Broadway is also slowly evolving into a nicer place, with some new businesses opening nearby. The area has a lot of potential, but who knows what will actually happen, especially if we have another recession in the next decade. The location is extremely close to Sacramento downtown. There are plan to build a tunnel to Miller park and the nice bike trail along the river. The residents are gonna be able to bike five minutes to the new Golden 1 Center arena. There are so many nice fancy restaurants to eat in downtown. Target is a couple blocks down the way. Extremely close access to the major freeways. Location is actually wonderful if you just pretend those projects aren't there.

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