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Huh? By this logic nobody should ever buy a house unless they are independently extremely wealthy and would be able to cover all costs for every life event and expense with no chance of running out of money- ever.
In such a scenario, what would be the effect on the economy as whole over time? There would be very few landlords and many millions of renters. Not sure how this would play out. Besides, money is created out of debt- out of lending to people.
what you are forgetting is that a lot of people bought homes that cost far more than they could legitimately afford. if you only make $50k per year, why are you buying a $500k house? just because the bank said so? at $50 in a soft economy, you should be looking at a house more along the lines of $100k or so.
the reality of the situation is that not everyone can afford a house. maybe they can make the mortgage payments, but when you include property tax, maintenance, utilities, and suddenly you are behind in your mortgage payments, and the bank is not likely to work with you, where as if you were renting, and were a good tenant the landlord would be more likely to work with you. perhaps he has you paint the house for the rent one month, or he lets you slide on part of the rent as long as you make it up sometime. a friend of mine has three houses he rents out. he is very careful to whom he rents, and he is able to keep his rent rates fairly low because his houses are free and clear, and he does most of the work on the properties himself rather than farm the work out.
what you are forgetting is that a lot of people bought homes that cost far more than they could legitimately afford. if you only make $50k per year, why are you buying a $500k house? just because the bank said so? at $50 in a soft economy, you should be looking at a house more along the lines of $100k or so.
the reality of the situation is that not everyone can afford a house. maybe they can make the mortgage payments, but when you include property tax, maintenance, utilities, and suddenly you are behind in your mortgage payments, and the bank is not likely to work with you, where as if you were renting, and were a good tenant the landlord would be more likely to work with you. perhaps he has you paint the house for the rent one month, or he lets you slide on part of the rent as long as you make it up sometime. a friend of mine has three houses he rents out. he is very careful to whom he rents, and he is able to keep his rent rates fairly low because his houses are free and clear, and he does most of the work on the properties himself rather than farm the work out.
No, I was not "forgetting" anything. I was responding to a remark someone made and I was referring to the idea, for example, that someone could buy a house today that he could easily afford NOW (fully qualified, 20% down, less than 25% of his hopefully rising income, all that, etc) and for the forseeable future. Maybe he pays on it for 25 years and loses his job in the 26th year. Does that mean that at the outset he couldn't afford it?
By that logic, since anyone can lose a job or have a medical crises, etc.- virtually nobody should buy a house other than the independently wealthy with bottomless money to pay for any contingincey. It IS a gamble as the other poster said, but one could also come to the day when he couldn't pay rent either. Life is a gamble.
No, I was not "forgetting" anything. I was responding to a remark someone made and I was referring to the idea, for example, that someone could buy a house today that he could easily afford NOW (fully qualified, 20% down, less than 25% of his hopefully rising income, all that, etc) and for the forseeable future. Maybe he pays on it for 25 years and loses his job in the 26th year. Does that mean that at the outset he couldn't afford it?
By that logic, since anyone can lose a job or have a medical crises, etc.- virtually nobody should buy a house other than the independently wealthy with bottomless money to pay for any contingincey. It IS a gamble as the other poster said, but one could also come to the day when he couldn't pay rent either. Life is a gamble.
When a married couple who are first time homebuers would become my clients I always suggested to them that they plan their payments and thus their qualification based on the one with the lowest income. In that way, as so often happens when married couples buy the first house, they are not over their heads when the 1st baby is conceived and the wife decides that she wants to become a stay at home mom.
Yes, life is a gamble but one can choose to prepare so that the odds are stacked in one's favor rather against. Those who fail to prepare, prepare to fail.
LOL....well something is ALWAYS coming and while you might not know when or what it is is not a reason to live for the moment and be unprepared.
I guess it's never bothered me to go against the flow even it was hard. I didn't fall for peer pressure as a teen, we didn't fall for it with the economy either. It was hard sometimes, we endured 'lectures' from people who said we should buy as big a house as we could possibly afford. We were ridiculed by friends and family for saving up to do home repairs in cash instead of tapping into equity in the house. We got 'helpful' e-mails from my IL's featuring articles about how wise people never pay off their mortgage. Heck, people laugh at my coupons or scowl at me when it takes too long to check out and I just don't care. We live so far away from the edge of the cliff...why should I care what the other lemmings think? It's astonishing to me to hear '"It's hard not to get caught up in it." or "Everyone else was doing it." or "No one knew this would happen." are serious responses being used by intelligent adults.
You made my day. Thye number of preople that can do what you did is really small. The number of people that should have done what you did is really large. What you did is you didn't join the groop that was heading off the edge of the finacial cliff. The only way to go against the flow is to leave the groop. More power to you.
The truth is that anyone with a mortgage is probably only a pink slip away from losing their home. People can talk about how clever they played it, how they paid cash or have zero debt, but that isn't how the majority of homes have EVER been sold. It's not all just a housing crisis issue, sometimes it's a lost job issue. And it happens all the time, just not on as large a scale as we have now.
We have our house paid off, but if we got laid off we would be in major trouble. Why? Because of obscene Property Taxes. They exploded during the real estate boom, and when that was over and we were all "locked in" thanks to the real estate collapse, they continued to rise at double-digit rates.
The Middle Class can no longer afford the gigantic government that grew like a cancer until it killed all economic growth. Government allowed and incentivized sending jobs overseas, and failed to protect us from any of the abuses of business and CEOs. It made a financial farce of every program it created (ensuring that American workers pay now while ensuring that no benefits will be available for them later), while destroying the value of the dollar by borrowing even more than the trillions it took from working Americans.
I guess it's never bothered me to go against the flow even it was hard. I didn't fall for peer pressure as a teen, we didn't fall for it with the economy either. It was hard sometimes, we endured 'lectures' from people who said we should buy as big a house as we could possibly afford. We were ridiculed by friends and family for saving up to do home repairs in cash instead of tapping into equity in the house. We got 'helpful' e-mails from my IL's featuring articles about how wise people never pay off their mortgage. Heck, people laugh at my coupons or scowl at me when it takes too long to check out and I just don't care. We live so far away from the edge of the cliff...why should I care what the other lemmings think? It's astonishing to me to hear '"It's hard not to get caught up in it." or "Everyone else was doing it." or "No one knew this would happen." are serious responses being used by intelligent adults.
That kind of talk has been around a long time. Almost 40 years ago, people were saying similar things. I/we never bought into that either. However, sometimes s*** happens to people.
Quote:
Originally Posted by rbohm
what you are forgetting is that a lot of people bought homes that cost far more than they could legitimately afford. if you only make $50k per year, why are you buying a $500k house? just because the bank said so? at $50 in a soft economy, you should be looking at a house more along the lines of $100k or so.
the reality of the situation is that not everyone can afford a house. maybe they can make the mortgage payments, but when you include property tax, maintenance, utilities, and suddenly you are behind in your mortgage payments, and the bank is not likely to work with you, where as if you were renting, and were a good tenant the landlord would be more likely to work with you. perhaps he has you paint the house for the rent one month, or he lets you slide on part of the rent as long as you make it up sometime. a friend of mine has three houses he rents out. he is very careful to whom he rents, and he is able to keep his rent rates fairly low because his houses are free and clear, and he does most of the work on the properties himself rather than farm the work out.
Well, who lent them the money for these houses? The mortgage lenders were working under the same set of assumptions about the economy. Re: renting, few of the landlords I ever had (and we rented until we were well into our 30s) would "work with you" if you lost your income. Certainly few if any would give you a month's rent (usually at least $1000, often much more) for painting the house, especially if it didn't need painting. Would your friend the landlord let people live in his houses for free?
You made my day. Thye number of preople that can do what you did is really small. The number of people that should have done what you did is really large. What you did is you didn't join the groop that was heading off the edge of the finacial cliff. The only way to go against the flow is to leave the groop. More power to you.
Why? Why can't people buy within their budget instead of maxing out what the bank says they can afford? Why can't people think before they spend? Why can't people develop a financial plan with long term focus instead of only considering what they can afford with this paycheck? Why can't people understand that spending more than they bring in, month after month, not saving for the future, not preparing for emergencies, thinking that things will always work out...yeah...that's not a good plan and it doesn't take a rocket scientist to see it.
I'm not willing to give out easy passes on this one. We can't learn from our mistakes if we fail to recognize that we've made any.
Quote:
Originally Posted by Katiana
That kind of talk has been around a long time. Almost 40 years ago, people were saying similar things. I/we never bought into that either. However, sometimes s*** happens to people.
True, but that is not what this article is about. Nothing happened to these people, they happened to themselves. MANY folks are in the same situation right now. Hopefully they will be smarter next time.
Well, who lent them the money for these houses? The mortgage lenders were working under the same set of assumptions about the economy. Re: renting, few of the landlords I ever had (and we rented until we were well into our 30s) would "work with you" if you lost your income. Certainly few if any would give you a month's rent (usually at least $1000, often much more) for painting the house, especially if it didn't need painting. Would your friend the landlord let people live in his houses for free?
no my friend would not let people live in houses for free, that wasnt the point. my point was that he is willing to cut people some slack if they run into a problem now and then.
Why? Why can't people buy within their budget instead of maxing out what the bank says they can afford? Why can't people think before they spend? Why can't people develop a financial plan with long term focus instead of only considering what they can afford with this paycheck? Why can't people understand that spending more than they bring in, month after month, not saving for the future, not preparing for emergencies, thinking that things will always work out...yeah...that's not a good plan and it doesn't take a rocket scientist to see it.
I'm not willing to give out easy passes on this one. We can't learn from our mistakes if we fail to recognize that we've made any.
What is going to happen now is that responcibilaty is going to be in fassion. This coming up generation will be far more responsible than the last one was. It is the nature of the beast.
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