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Post by CMF Newsman on Mar 22, 2007 11:36:19 GMT -5
CINCINNATI (Reuters) - Until last year, financial counselors at the Home Ownership Center of Greater Cincinnati spent most of their time teaching Americans how to buy a first home. Now, they're deluged by broken and bereft homeowners facing foreclosure. "Oh Lord, there is no way we can keep up with these calls," said Kaye Britton, a foreclosure counselor at the downtown nonprofit group that promotes home ownership to minority Americans, among others. Britton has been helping clients reach the American dream of owning a home since 2002. Handmade wall signs urge would-be buyers to "sweat the small stuff" and note the lender's golden rule: "They have the gold, they make the rules." Foreclosures were formerly rare, caused mostly by the loss of job, divorce or medical bills. complete story
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Post by daworm on Mar 22, 2007 13:48:18 GMT -5
Never get an ARM loan for your primary mortgage, unless you can afford to pay the maximum rate that can be charged, or you have the cash to close on a switch to fixed.
These people bought too much house, being able to barely afford the ultra low interest rates of the last few years. I find it had to sympathize.
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Post by Gary on Mar 22, 2007 13:56:51 GMT -5
Another thing that is going to seriously bite people in the ass are the "interest-only" mortgages that suddenly add in principal after ten years, basically doubling (sometimes tripling) your mortgage payment.
People are betting that their financial situation will be much improved a decade from now, and not all of them will be correct.
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Post by el Gusano on Mar 22, 2007 14:15:34 GMT -5
Worm, one thing that I have found, is that people buy so much house because they "need" two extra bedrooms, play rooms, 3 car garages, etc., not to mention all sorts of other "needs" and they max themselves out. When I lived in DC, I visited many houses that were $500,000+, with a new Mercedes and BMW in the driveway, with the perfectly manicured hedges and the grass that is mowed twice per week, only to discover that the furnishings were a wire-spool table, some folding chairs, and a B&W TV because they spent all their money on image.
Well image, imaginary necessities, or whatever, people are buying more than they need and they are buying to their max amount they can borrow, without the ability to pay for repairs down the road or buy the new Mercedes or anything else.
One interesting thing around here is that you will find owner financing mortgages that offer a low payment with a lump sum every year equal to the PFD of the parties involved and other creative things. This makes some people buy more than they otherwise would, but it also permits others to simply afford a home.
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Post by voxpopuli on Mar 22, 2007 14:30:28 GMT -5
My wife used to sell real estate and she could tell you countless stories of people who qualified for ridiculous mortgage amounts and then bought way too much house.
You can always spot them: they have cheap blinds in the windows and very little furniture, since they can't afford anything after they pay their mortgage every month.
When we bought our house in the 1980's (not a very good time for interest rates, either), we made sure to get no more than we could reasonably afford, even though we qualified for almost twice as much as we ended up borrowing.
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Post by gridbug on Mar 22, 2007 14:34:27 GMT -5
I have a big a$$ house that I can afford because the neighborhood was "that bad" when I got it. Now the neighborhood is too expensive and will no doubt have its fair share of foreclosures soon enough... Virtually anyone that gets an Interest Only loan will pay through the nose for their ignorance. On the other hand the officials at their lending institution will make a comfortable living
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Post by daworm on Mar 22, 2007 14:43:32 GMT -5
My current house is physically larger than I need, but I am planning on some expansion of need. The mortgage(s) are a bit higher than I am comfortable with right now, but part of that is because I am still also carrying the mortgage on my old house (anyone want a fixer-upper in N. Chatt?) and I have some wedding expenses that are only just now being paid off. Some flooding a couple of months back due to a clogged plumbing line also is hurting the bottom line. Most of these were short term financing problems that I knew they were coming and planned for appropriately. Still, had I to do it over again, I might have bought a smaller house.
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Post by Gary on Mar 22, 2007 15:34:14 GMT -5
When we started looking at moving to a larger house, we pre-qualified for literally twice as much money as we wanted to spend. We both have very good credit in part because we don't do stupid things with financing, which naturally is why we got offered ridiculous amounts of money from banks, etc.
I just transferred a bunch of savings into a money market account which comes with a standard VISA card. I was literally instantly qualified with a credit limit that made the bank clerk do a double-take. And I have almost no intention of even using the card.
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tuffmustang
Senior Member
The Cartoon Messiah
Posts: 593
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Post by tuffmustang on Mar 23, 2007 19:36:16 GMT -5
I talked to a Credit counselors many, many years ago.
The "plan" he came up with had me paying out more through them then what I was paying in monthly bills.
Non profit my $#&)@#&
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Jay
Senior Forumite
Captain Cupcake
Posts: 5,070
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Post by Jay on Mar 23, 2007 22:11:17 GMT -5
It's nothing new, I guess. Buying a house is just another type of debt. And we all know how good a lot of people are about getting into a ton of debt.... Just like buying stuff they can't afford and just putting it on a credit card.... They're getting themselves in serious debt by buying a house they can't really afford...
~J
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Longshot! [ Saint ]
Moderator
Jack's Complete Lack of Surprise
I'm the Broken One who Fixes It
Posts: 4,309
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Post by Longshot! [ Saint ] on Mar 24, 2007 5:14:37 GMT -5
Worm, your house needs its own Zip Code, but you are in financial shape to handle such (as you indicated and planned) and there is nothing wrong with buying a house to grow into, or at least I hope there isn't because I did the same thing. I was VERY fortunate on a few levels, because while building it loan rates were the lowest they'd been in 50 years, as I understand it. My loan interest is only slightly above GA sales tax rates. The second stroke of luck is that I bought my material three weeks prior to two hurricanes devastating Florida, quadrupling prices of everything I bought. But like you, I lived well below my means in the years prior and planned everything five steps in advance.
I had 'too much house, but it was unfinished space that cost me almost nothing at the time of the build. Now three years after building, I am beginning to make unfinished rooms habitable because I can pay for them in full, and I have roughly 110% in equity in the joint which also makes it an additional retirement package. Of course, the equity will increase as I finish more space and add more square footage, but that is not a coincidence either.
If you got an ARM, you are a sucker, plain and simple. I can think of no exceptions. But no matter how much 'Pants-Shitting Fear' is instilled in us by the media over the housing market, I can assure you of one thing: People will probably still need a place to live, so it's not a bad bet that the market will survive.
If not? I'm a big fan of treehouses and caves, too.
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Post by Warkitty on Mar 24, 2007 6:36:07 GMT -5
I could easily afford my house when I bought it.
Then I took a pay cut to live in my house and couldn't easily afford it. I could afford it, but not easily.
Then I took another hit with a sales job.
Now I'm working on affordability again, if I can get my car fixed and after those paychecks start coming in. Three weeks into work with one of those weeks being unpaid time off makes that a little painful still.
Regardless, the Troll's happy with the prospect of having his Sugar Momma back working. Soon, I shall be able to deal with those pesky issues of home ownership again. With ease. Like... broken grills.
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Jay
Senior Forumite
Captain Cupcake
Posts: 5,070
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Post by Jay on Mar 24, 2007 15:19:00 GMT -5
ARMS can be a good idea for some people....depending on how long of an ARM it is... If you're not planning to stay in the house for very long, it can work for you. An example is 5/1 and 7/1 ARMS.. Since most people move every five years or so, this can be good for some of those people.
~J
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Post by one on Mar 24, 2007 23:38:11 GMT -5
I can't wait for the bubble to explode and crash because I will finally be able to buy a house for what it is actually WORTH rather than what some trick in high heels wants to sell it to me for because she needs more lipo. Then the market can rise again
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Longshot! [ Saint ]
Moderator
Jack's Complete Lack of Surprise
I'm the Broken One who Fixes It
Posts: 4,309
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Post by Longshot! [ Saint ] on Mar 25, 2007 6:57:32 GMT -5
Wait a minute now; what's wrong with a trick in high heels that likes lipo? Sold my condo in a HEARTbeat.
And I stand by my ARMS Ethos. Never, at any time.
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Post by CMF Newsman on Mar 26, 2007 9:19:39 GMT -5
WASHINGTON (AFP) - The dream of home ownership could turn into a living nightmare for millions of Americans in the next couple of years as home foreclosures are expected to skyrocket. Alarmed lawmakers, such as Republican Senator Richard Shelby of Alabama, say the recent spike in home repossessions is just "the tip of the iceberg." The fizz came out of the US housing boom last year after several years of stellar growth, fueled in part by a speculative binge, but also by sales of "exotic mortgages" including adjustable rate mortgages (ARMs). Consumer advocates say such loans are costing many working class families an "ARM and a leg," and that buyers were often unaware ARMs can start out with a low "teaser" interest rate that fast kicks into a much higher rate. complete story
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Post by daworm on Mar 26, 2007 9:23:40 GMT -5
We know who was ignorant, and I'm sure you can guess who'll be tasked to "fix it".
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Post by gridbug on Mar 26, 2007 11:27:27 GMT -5
Aw man - this could cut into all that necessary corporate welfare!
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Post by daworm on Mar 26, 2007 11:59:21 GMT -5
Yeah, we could stand to lose some of that, too. No more protection for the modern day buggy whip makers.
(Corporations can be stupid, too.)
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Jay
Senior Forumite
Captain Cupcake
Posts: 5,070
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Post by Jay on Mar 26, 2007 17:53:47 GMT -5
The government?? What's the government going to do?? Nothin'....
~J
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