Sign of the Times: 20 Year Old Buys Home with just 3.5% Down

How about them apples?  Denise Tejada bought a house last month at the age of 20, thanks in large part to a loan guaranteed by the Federal Housing Authority.  She scored a $183K FHA loan and is now in her very own house, too bad she can't buy a six-pack to celebrate, only one more year.

(BusinessInsider.com) - This story offers a dramatic demonstration that, despite the housing bubble causing the worst economic downturn in generations, the ideology of home ownership is alive and well in the United States and still being supported by the government.

Without question, Tejada's loan is toxic--to her and to the taxpayers who are backing the loan. Her house cost $155,000. Tejada's loan was apparently made on a micro-down payment of just 3.5%, the minimum down payment to qualify for an FHA loan. On top of this, however, she got an additional government backed loan to make improvements. Her total loans amount to $183,0000. In short, she was immediately underwater on her new house.

The monthly payments on her debt amount to $1328. Her income is $2470, leaving her with just $285 a week to live on. She's paying 54% of her income to make the mortgage payments. She earns that income by holding down one full time and two part time jobs. Obviously, this woman has a strong work ethic. But it also means her income is precarious. With unemployment still rising, she obviously should be worried about losing one of her three jobs.  A loss of one of them would likely leave her unable to make the debt payments.

Tejada appears to be using imaginary numbers about the value of her house. She says that when she bought  it, the house was just a “box” with no kitchen or bathroom. Now it is "gorgeous". She claims the renovation has increased the value of her home from $155,000 to $255,000.

"I bought my house for $155,000.  And now, after all the fixing, after all the remodeling, my house is worth $255,000. So just within a month period, I made a $100,000," she tells Market Place's Scott Jagow.

As far as we can tell, this is just mark-to-imagination valuation. She doesn't give any indication about how she arrived at the conclusion that she has made a $100,000 gain in just a month. Even if her improvements had dramatically increased the value of the house beyond the cost of the improvements themselves, she would have to contend a declining housing market. From last year to this year, the median price of homes sale in Oakland, California has declined 28%.

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