First-time buyers see dreams fade: Easy mortgages, overvalued homes leading many into foreclosure

Indianapolis Star ^ | January 29, 2004 | Chris O'Malley

[sarcasm]

Rock-bottom interest rates and low-down-payment mortgages have allowed more first-time homebuyers to fulfill the American dream in recent years, but some say the dream has turned to nightmare.

A number of inexperienced buyers now face foreclosure, complaining they didn't realize the high cost of homeownership -- everything from adjustable rate mortgages to hidden taxes to construction defects.

[sarcasm]

ping

[FreedomPoster]

Barnes bought a house in 1999. She was surprised that Irwin Mortgage, which her builder recommended, approved a $103,000 mortgage with her then-income of about $25,000.
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The reason: "They basically are telling me I don't have enough income to maintain the mortgage," said Barnes, who said she now earns $4,000 a year more than when she bought the house.

Anyone who believe they can afford a loan, the size of the one the mortgage company will give you, is incredibly naive. This is a prescription for being house-poor at best, or foreclosed-up/bankrupt at worst.

Our first house, 20 years ago, was $20k less than her mortgage, and we were both working and making about what she was, each.

[FreedomPoster]

/foreclosed-up/foreclosed-upon/

[Prodigal Son]

Some of these first-time homebuyers said they didn't fully appreciate the impact the buy-down program would have on their monthly budgets.

Hmmm. Well, pass a law then...

Mainly this article is about people complaining about a situation they got themselves into. If you can't afford to pay the mortgage payments, you oughtn't buy a house. If the mortgage is structured in such a way that it will become impossible for you to make the payments three years down the road, you oughtn't sign that mortgage.

[beckysueb]

I am so tired of people getting themselves into debt and then acting like victims because they are expected to actually pay for their purchases!

[DB]

So "over valued houses" and "low interest rates" are the problem...

So under valued houses with high interest rates should fix everything...

Where's Carter when you need him...

[I still care]

I think standard rule of thumb is don't get into a mortgage more than twice your income.

That first roof you need to put on is a killer, also windows, and air if you are in the South. Also termites and plumbing problems. When you figure in taxes and insurance, home ownership can be far more than many people realize.

They just see their rent, but I figured it out and it took me 6 years in my current house to break even than if I had just paid rent, and now I need a roof.

[I still care]

Oh, goodness - I remember that. I was just married at the time Carter became president, and all my friends were buying houses. Then when the bottom dropped out of the real estate market, they had mortgages that were impossible to redo! Some people were carrying mortgages at 17%, and couldn't remortgage because their house values had dropped, leaving them with no equity.

I think the answer might be a course in high school on practical finances - credit card debt, how to buy a home, renting vs selling, buying a car, how to invest - it would also help wake kids up to the practical side of life - something they seem woefully short on when they get out of school.

They teach so much garbage, you would think something this important might get covered.

[VermiciousKnid]

I will be interested to see what happens in a few years here on Long Island where house prices have skyrocketed recently.

Our former next-door-neighbors sold their home last summer for an astounding price of >$400K (about $250K more than what they paid for it only 8 years ago). The young couple who bought it are both teachers (no kids yet), and are carrying a $300K mortgage.

When you add in the close to $10K/year in property (school) taxes, I simply do not know how they plan to do it, especially after kids come along...

Regards,

[Always Right]

Mainly this article is about people complaining about a situation they got themselves into. If you can't afford to pay the mortgage payments, you oughtn't buy a house

Many of these first-time homeowners are lured in by ads which show a payment that is much lower than their rent, with little indication that these payments are temporary. It is ultimately the buyers responsibility, but there are a couple of companies in the Indy which virtually everyone in the subdivision are facing foreclosres.

[Always Right]

And part of the problem is these builders are also the mortgage brokers so they control who does the apprasials and help fudge numbers so they can get loan approval.

[macrahanish #1]

Our small,rural high school has a teacher who teaches this in his economics class. He also uses Thomas Sowell's
Economics "text" in the class.

[palmer]

Sabur said her dryer caught fire, a problem traced to the builder's crew accidentally driving a metal fastener through her wiring

What B.S. This whole article is probably B.S.

[ChromeDome]

bttt

[Biblebelter]

I cannot put all the blame on those who take out the loans. Banks are greedy and stupid and they always have been. And when their greed and stupidity and criminality get them into trouble, it always the taxpayer that gets them out of trouble. Does anyone remember the S and L debacle? Just because Bill, Hilary, and McCain do not remember it does not mean it did not happen. I would not want to place my money with any institution that lent 100k to someone making 25k. That is simply bad business and bad banking.

[joesbucks]

Whatever happened to a lender saying........no?

[Iconoclast2]

What happened is that the real villian of this piece, naturally never identified, the Federal government, created a complex web of institutions to eliminate the risk to the banks.

[Always Right]

Whatever happened to a lender saying........no?

Some of these bigger builders act as the sole mortgage broker for the whole community. They know how to work the numbers so they can sell the mortgage and then it is out of their hair. Also being the mortgage brokers allows them to dictate who does the appraisal, so they can get the homes with their high-marked up options to appraise out.

[joesbucks]

I sell real estate. However, there is not one person who wants to hear the "no" word. Our overheated consumer society has created an instant gratification mentality. My wife's son in law wants us to take him to see homes that are way out out of his price range due to income. Yet he's got financial institutions that will lend him the dough. We're now on his sh*t list because we keep telling him he should be looking at lower cost homes. But who do you think he will come to when the boat starts sinking? worse yet, what will he say when we won't or can't provide the pump to bail him out?