"D. Peter Maus" wrote in
:

On 10/15/11 17:47 , Don Kirkman wrote:
On Mon, 10 Oct 2011 23:04:46 -0700, John
wrote:



The rest of what you had to say, bad decisions, paying too much for
a home, etc. ... well ya', that is covered in "Life 101." If you
missed that class, problems will keep arising until you do take that
class! ... don't make those bad decisions, don't pay too much for
over valued property, don't buy what you can't afford, etc.

You ignore the people who were *told* they could afford the houses
they bought. People with a duty to be diligent--brokers, financiers,
investment houses, all assured them that they deserved a good house
and by heck they could afford one because they were given them a
real bargain.

Basically, it comes down to common sense, if you can't afford the
house, don't buy it... yet ...

But if you're assured that you can afford it, who is the real culprit
here?


When I bought my last house, I carefully constructed the budget.

Good plan.....

When
I got to the financing stage, every carrier I spoke with pushed like
mad to get me to take a non-traditional mortgage for far more than I'd
considered, with variable interest, balloon payments, and 'creative'
structures, all based on the assumption that 1) I'd be selling the
property at a substantial profit within 5 years and 2) incomes always
rise.

What you have is several people (real estate, financial lenders, etc..)
all wishing to get as much out of the deal as *they* possibly can. After
all, it is up to *you* to make the payments, not them.

I resisted, and stayed with a 30 year fixed at the interest that
I'd
shopped around for. And was told that rate was no longer available, so
the non-traditional was my only option.

Or a fixed at a higher rate, I presume.......

They sold it hard. "You should buy the maximum amount of house you
can possibly afford, and you can afford this."

In general, that is true.....however, not with a VRM.

"You're upwardly
mobile, you'll be selling to upgrade before the interest rates
increase and make a bundle in the process." "You won't be in the house
by the time the balloon comes due."

Yeah.......uh huh.....

Even going so far as to tell me
that at my age, a traditional 30 year fixed would simply not be
available. But that a 15 year ARM was a virtual certainty to be
approved, at nearly 50% more than I'd planned to borrow.

Interestingly, they are still out there. Your estimate of the payment
would be true. A $150K loan at, say 4.50% for 30 years would cost you
$760 P&I while that same load at the same interest rate for 15 years
would cost you $1147 P&I. Of course, your total cost of the loan would
be a lot less. $273,600 for the 30 year and $206,460 for the 15 year.

I eventually found the mortgage I wanted, at the rate I wanted, and
when things collapsed in the housing market, and the economy slowed, I
had both equity and a payment I could manage. But it was a fight to
the death to get a lender to agree to the traditional mortgage.

I have never had a problem with that.

Few go into this kind of transaction with a fierce determination to
do things his own way. Most I've encountered would be quickly swayed
by both the temptation of more house than they thought they could
afford, or the enticing finance opportunity when so reassured by the
lending agency that the risk is small, and the benefits so great.

Yep, and now you have greed on everyone's part, not just the money and
real estate portions.

Now, I'm not, by a long shot, opposed to creative financing. I've
been quite creative in financing my businesses. And a couple of really
nice cars. But only in the short term, and only for small, manageable
amounts of money. Specifically, so I'd be prepared as economic
fortunes change.

So, though I'm hardly one of those 'invade Wall Street' protest
types, who blames all ills in the universe of Man on the banking
system, I can say that I've seen first hand some of the more
underhanded, and manipulative behaviours that have led a lot of folk
down a very turbulent river.

So, yes: Who is the culprit, indeed.

Depends......could be the real estate folks, the lenders, the borrower,
or any combination of them or all three.

--
Sleep well tonight.........RD (The Sandman)

Witnessing Republicans and Democrats bickering over
the National Debt is like watching two drunks argue
over a bar bill on the Titanic.....