[Swimmom32]

Listen the fact that some people think that its irresponsible let me tell you, my best friend bought a home with a conv 30 mortgage did NOT buy more than they should nor did they borrow more than they should, her DH lost his job the Value went down almost 85k in 14 months of being in their home, Her DH found another job could not afford to pay both a mortgage and rent and the best option was to Short Sale and fall behind on the payments...The fact that they had no debt owned cars out right does not make them irresponsible..Was her DH not supposed to take this full time job just so he can pay the mortgage? I think not and now according to another part of that article The banks are Paying people to Short Sell instead of going into Foreclosure unfortunately my friend will not be able to reap if any benefits...I dont think that people should be judged..For those that live beyond their means and just "walk away" well that is entirely different story, but those who needed to do the right thing and still wound up loosing everything well they aren't bad people...

[Soup Not See]

Originally Posted by Swimmom32

Listen the fact that some people think that its irresponsible let me tell you, my best friend bought a home with a conv 30 mortgage did NOT buy more than they should nor did they borrow more than they should, her DH lost his job the Value went down almost 85k in 14 months of being in their home, Her DH found another job could not afford to pay both a mortgage and rent and the best option was to Short Sale and fall behind on the payments...The fact that they had no debt owned cars out right does not make them irresponsible..Was her DH not supposed to take this full time job just so he can pay the mortgage? I think not and now according to another part of that article The banks are Paying people to Short Sell instead of going into Foreclosure unfortunately my friend will not be able to reap if any benefits...I dont think that people should be judged..For those that live beyond their means and just "walk away" well that is entirely different story, but those who needed to do the right thing and still wound up loosing everything well they aren't bad people...

No one is saying they are bad people ... some questions for you though ...

1) Did your friends have any savings to cover the mortgage payments should a job be lost ? If not, they were over-extended ...

2) Did they try and rent their home to cover the mortgage ? And move to a cheaper apartment until they got back on their feet ?

3) Did the wife go back to work to help with the mortgage payments ?

Every situation is different, but in most cases folks were over-extended.

[annerk]

Originally Posted by Swimmom32

Listen the fact that some people think that its irresponsible let me tell you, my best friend bought a home with a conv 30 mortgage did NOT buy more than they should nor did they borrow more than they should, her DH lost his job the Value went down almost 85k in 14 months of being in their home, Her DH found another job could not afford to pay both a mortgage and rent and the best option was to Short Sale and fall behind on the payments...The fact that they had no debt owned cars out right does not make them irresponsible..Was her DH not supposed to take this full time job just so he can pay the mortgage? I think not and now according to another part of that article The banks are Paying people to Short Sell instead of going into Foreclosure unfortunately my friend will not be able to reap if any benefits...I dont think that people should be judged..For those that live beyond their means and just "walk away" well that is entirely different story, but those who needed to do the right thing and still wound up loosing everything well they aren't bad people...

That is not a strategic default. That said, there are often ways to make having a second household affordable. They could have taken in a boarder at their primary residence to offset the cost of him renting a room in the new area. Did they have any savings to tap into? They could have sold one of the cars if they owned them both outright. There are a lot of ways of being creative with finances, unfortunately people refuse to think outside of the box.

[Swimmom32]

unfortunately with health cirrcumstances not much more they could have done..yes they had savings which they used to pay for the year of the mortgage then just couldnt live in both places and afford 2 households anymore....if they Rented the house which was their 1st thought and after feedback that people werent paying again the home value went down so much and their mortgage and tax payments were the same and it never would not have covered their costs..The only savings they had, was what they paid the mortgage with for a while then went into default and had it on the market since Aug of 07 they moved in 09 and floated the house for a while then had one buyer that fell through and then another buyer that couldnt get a mortgage an then finally she called me and said we have a buyer and the rest is history but the it took forever with the process and finally it closed...It just amazes me how people can comment on something without being in someone's postion..Crap happens in life and some things one cant control like the Economy and being out of work and not being able to pay everything...Why people would think they want their credit messed up is beyond me, they cant buy a house now for who knows when since they have no more savings etc, and I don't feel people should be penalized if they didn't intentionally walk away like some of the people here in florida who my neighbors...They lived in these huge homes, and didnt want to pay or couldn't pay their mortgages however they still drive their mercedes and Audi's and other luxury cars our friends do not drive any of those..so the bottom line is good people lost a lot of things and what you persay think they should have done or didnt do doesn't mean they over extended themselves there are a lot of different factors that play a role in people's lives...and who are we to judge..I happen to know these people for a very long time...My DH has so many people he knows personally facing short sales and foreclosures in NJ Because they lost their jobs etc, unfortunately this is what our country has come too..sad but true...

[Gatornation]

Personally I think you can't really afford a house if you couldn't make what would be the payment on a 15 year fixed. Not saying you have to get a 15 but if you can't pull off what that payment would be you can't really afford it.

[annerk]

Originally Posted by Gatornation

Personally I think you can't really afford a house if you couldn't make what would be the payment on a 15 year fixed. Not saying you have to get a 15 but if you can't pull off what that payment would be you can't really afford it.

I don't really agree with that. These days it can be less expensive to own than to rent. Having spent seven years in the mortgage industry, I can tell you for a fact that the average couple buying a home puts about 25% of their gross income into the PITI on a 30 year fixed. If they were to move into a 15 year loan, they'd be looking at about 40% of the gross income. Could they make those payments? In most cases yes, but doing so would preclude any contributions to savings--emergency or retirement.

I think you'd be better off saying that people can't afford a home if they can't cover the payments on a 30 year plus put at least 15% of their gross income into savings every year.

A very wise man told me years ago that it's more important to have savings than be debt free, as long as your debts are in line with your income and for items like homes and modest cars. You can always use savings to pay debt, you can't use debt when you need cash in an emergency.

[Gatornation]

Originally Posted by annerk

I don't really agree with that. These days it can be less expensive to own than to rent. Having spent seven years in the mortgage industry, I can tell you for a fact that the average couple buying a home puts about 25% of their gross income into the PITI on a 30 year fixed. If they were to move into a 15 year loan, they'd be looking at about 40% of the gross income. Could they make those payments? In most cases yes, but doing so would preclude any contributions to savings--emergency or retirement.

I think you'd be better off saying that people can't afford a home if they can't cover the payments on a 30 year plus put at least 15% of their gross income into savings every year.

A very wise man told me years ago that it's more important to have savings than be debt free, as long as your debts are in line with your income and for items like homes and modest cars. You can always use savings to pay debt, you can't use debt when you need cash in an emergency.

What you are leaving out though is the huge amount in interest you pay on a 30 compared to 15. People could pull it off but would have to buy less house.

[annerk]

Originally Posted by Gatornation

What you are leaving out though is the huge amount in interest you pay on a 30 compared to 15. People could pull it off but would have to buy less house.

Not really. It's about 1/4 percent in rate. If you make monthly principle payments as if you had a 15, the difference is pretty minimal--about $3K on a $100K loan. Because you are paying down that principle faster at the beginning, it negates the long term amortization factor where you are pretty much only paying principle for the first 10+ years.

You do need to be disciplined to make this work. We went this route as my job situation was unstable when we took the loan, and we wanted to be sure we could handle it on a single income if we needed to. Depending on my dividends in 2012, we might be able to pay it off in 13 or so years. Right now we're on track for 15.

[Gatornation]

Originally Posted by annerk

Not really. It's about 1/4 percent in rate. If you make monthly principle payments as if you had a 15, the difference is pretty minimal--about $3K on a $100K loan. Because you are paying down that principle faster at the beginning, it negates the long term amortization factor where you are pretty much only paying principle for the first 10+ years.

You do need to be disciplined to make this work. We went this route as my job situation was unstable when we took the loan, and we wanted to be sure we could handle it on a single income if we needed to. Depending on my dividends in 2012, we might be able to pay it off in 13 or so years. Right now we're on track for 15.

Well most aren't making extra payments. I'm talkin interest from taking 15 years compared to 30.

[annerk]

Originally Posted by Gatornation

Well most aren't making extra payments. I'm talkin interest from taking 15 years compared to 30.

Oh, in that case I agree, there is a huge difference. But like I said, taking a 30 but paying it off in 15, the difference is minimal.

You do need to be disciplined though. Only once did I not pay the extra and that was because I was laid off and wanted to conserve cash. As soon as I started working again, I "caught it up" so we were again going to meet a 15 year payoff. (I did continue to pay the mortgage of course, just had the one month I didn't pay the self-imposed extra principle.)