Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
One thing is for sure, if you want your kids to ever own a home, start saving their down-payment now. The days of zero-down are over. Forget the college fund - start the house downpayment fund. It will be easier to finance tuition than a home in 10 years.
This is how it is supposed to be, a means to prove to the bank you are capable and worthy to receive the credit to purchase a home. I recall that when growing up, you had a minimum of 10% cash down on any home and often more. Raw land you needed 20-25% cash down. These "creative financing" instruments are something totally foreign to me and if you would have told me that you could get into a home for nothing down, I would have laughed at you or thought you were being scammed. Come to find out, people were being scammed.
However there is nothing in this bill that states how the American tax payer will be compensated for coughing up 3000-3500 of their tax money to purchase these over valued homes. As it is written, the US government may very well at some point make money on the deal, but there is nothing to say that the people will benefit from this.
This is how it is supposed to be, a means to prove to the bank you are capable and worthy to receive the credit to purchase a home. I recall that when growing up, you had a minimum of 10% cash down on any home and often more. Raw land you needed 20-25% cash down. These "creative financing" instruments are something totally foreign to me and if you would have told me that you could get into a home for nothing down, I would have laughed at you or thought you were being scammed. Come to find out, people were being scammed.
However there is nothing in this bill that states how the American tax payer will be compensated for coughing up 3000-3500 of their tax money to purchase these over valued homes. As it is written, the US government may very well at some point make money on the deal, but there is nothing to say that the people will benefit from this.
We agree here, when I moved out to California a couple of years ago I couldn't believe the "creative" financing that was being done out here. I have owned homes in a few states back east over the past 30 years, buying my last one in 2000, and never put less than 20% down on a house. It wasn't really an option, unless you were buying a home via FHA or VA financing.
Out here in California, they had variable rate mortgages with the rate adjusting after only three months, and other mortgages with subsidized rates and negative monthly equity. I'd never seen anything like it.
I wouldn't do any of these financing processes, and the sales folks just viewed me as a crude hick from the midwest. Now, they are all unemployed, and their builders practically shut down.
We agree here, when I moved out to California a couple of years ago I couldn't believe the "creative" financing that was being done out here. I have owned homes in a few states back east over the past 30 years, buying my last one in 2000, and never put less than 20% down on a house. It wasn't really an option, unless you were buying a home via FHA or VA financing.
Out here in California, they had variable rate mortgages with the rate adjusting after only three months, and other mortgages with subsidized rates and negative monthly equity. I'd never seen anything like it.
I wouldn't do any of these financing processes, and the sales folks just viewed me as a crude hick from the midwest. Now, they are all unemployed, and their builders practically shut down.
What gets me is that there had to be lenders and real estate folks who also grew up with these basic fundamentals as well. From my bottom up perspective, I can only attribute this mess to unadulterated greed across the board. Investment banks, lenders, home owners, everyone wanted a free ride and when the bus ran out of gas in the middle of the desert, folks are sitting there looking at each other wondering who is going to fill the tank.
What gets me is that there had to be lenders and real estate folks who also grew up with these basic fundamentals as well. From my bottom up perspective, I can only attribute this mess to unadulterated greed across the board. Investment banks, lenders, home owners, everyone wanted a free ride and when the bus ran out of gas in the middle of the desert, folks are sitting there looking at each other wondering who is going to fill the tank.
Well, I don't think the problem was national. In Ohio, Vermont and Minnesota I had spoken with some builders (we were in the process of evaluating where to relocate) in the 2004-2005 timeframe, and the loan process and requirements were as I had always previously experienced. However, this was not the case in California.
The appreciation rates were the drivers behind the odd (to be charitable) mortgages. Home appreciation in much of California (and in Florida/Nevada/Arizona) averaged in the 12-20% range for quite a few years, and the folks became used to this. Even expecting a slowdown, the base prices had become so high that even a 5% appreciation would be $30,000 on a run-of-the-mill home.
I found this old article to "reset" the mindset that existed back then, you can see what it was like in the thinking at that time:
This is how it is supposed to be, a means to prove to the bank you are capable and worthy to receive the credit to purchase a home. I recall that when growing up, you had a minimum of 10% cash down on any home and often more. Raw land you needed 20-25% cash down. These "creative financing" instruments are something totally foreign to me and if you would have told me that you could get into a home for nothing down, I would have laughed at you or thought you were being scammed. Come to find out, people were being scammed.
However there is nothing in this bill that states how the American tax payer will be compensated for coughing up 3000-3500 of their tax money to purchase these over valued homes. As it is written, the US government may very well at some point make money on the deal, but there is nothing to say that the people will benefit from this.
Aye, those loans always made me shake my head. Ive always thought it best to have at least 10% down (closer to 20% is better) on a solid 30 year loan fixed with no "special clauses or penalties to principal payments or early payoff" that had a minimum payment that was no more than a 1/3 of your monthly income.
Some say go 15 year and I do agree for the most part, but I like to do the 30 year and make double payments on it during the good times with the ability to be able to drop down to the minimum if hard times hit.
I always told my wife, we should budget our expenses in long term payouts in a way that if we ever lost both our jobs, we could at least work 2 minimum wage jobs to get by at the very minimum. We have done that for the most part and because of it we can save large sums, buy everything with cash and we don't worry about "hard times" as much because we really don't "owe" anyone anything.
It is sad that people don't follow a conservative living style and gamble so freely with their livelihood. The problem is, now these poor decisions by people and "thrown to the wind" financial management only ends up putting pressure on those who do act responsible in their spending. Its like being punished because you were responsible. It makes no sense.
The troubling thing about this bailout is that it does nothing for the actual homeowners. I don't like spending taxpayer money on anything not required by the Constitution, but I know that Congress will pass some sort of legislation to try to stem the flow of failure until Bush leaves office. That's about how long some economists suggest this bailout will allow the markets to rally.
Now, if we're going to do something and we're a consumer economy, wouldn't it make more sense to just pay the mortgages of the people who can't afford them? That would allow companies time to restructure, receive their money for their poor investments, and keep homeowners in their homes while freeing up cash to put back into the economy. Even if we did this for only a year, pay every mortgage in the US, it seems to me that we'd be in better shape and spend less while allowing the markets to correct themselves. While it's not perfect, I would rather see this money spent on the taxpayers rather than the corporations, and in the end, this idea would benefit more people faster. After all, it is our money.
I was listening to part of the hearings on this bail out bill and noted something of particular interest. These bunk mortgage debts are far from unified in their risk. A foreclosure in rural Tennessee may be of far better value than say one in San Diego where it may take a decade or more to reach the value of the defaulted loan.
I recall while in Florida, reading the paper where it discussed how wonderful it was that the local market was seeing 8.5% annual appreciation. I remember thinking to myself, this just can't last as these homes appear already over valued as it is and to continue to buy in such an environment would be foolish.
As I said in the OP, I realize that something needs to be done, but this issuance of the bail out bill doesn't appear to be the way to go. I'm curious as to how much pressure will be brought by Congress to pursue alternatives or compromises. After all, in their own words, they just picked this number out of the sky.
What gets me is that there had to be lenders and real estate folks who also grew up with these basic fundamentals as well. From my bottom up perspective, I can only attribute this mess to unadulterated greed across the board. Investment banks, lenders, home owners, everyone wanted a free ride and when the bus ran out of gas in the middle of the desert, folks are sitting there looking at each other wondering who is going to fill the tank.
EXACTLY. The mess we are in is a result of pure Greed. Greed of the bankers, the home owners - who want a much bigger house than they can afford, etc. etc.
And the people who are supposed to fill the tank are WE.
Why should those that bought houses they can afford, don't have credit card debt and generally lived within their means bail them out? I don't see any reason to. If that means my "retirement savings" are gone, so be it. We will pay one way or another. but I prefer to leave as much of the "paying" to those that created the mess.
__________________
The price of anything is the amount of life you exchange for it. ~Henry David Thoreau
EXACTLY. The mess we are in is a result of pure Greed. Greed of the bankers, the home owners - who want a much bigger house than they can afford, etc. etc.
And the people who are supposed to fill the tank are WE.
Why should those that bought houses they can afford, don't have credit card debt and generally lived within their means bail them out? I don't see any reason to. If that means my "retirement savings" are gone, so be it. We will pay one way or another. but I prefer to leave as much of the "paying" to those that created the mess.
Partially true, however you also have to note that some of the highest foreclosure rates are in places such as Detroit and Cleveland, which never had any significant appreciation in home prices, and are being damaged by the economic difficulties individuals are experiencing in these areas. Those folks generally are pretty blameless, and victims of the market.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
