There's a great post today over at Generation X Finance about a story that ran on CNN yesterday. The story was about a couple who lost their home to foreclosure and are now living in a camper. On the surface, this sounds like the saddest story in the world. Until you hear the details:
- Couple buys 2,700 foot home in Las Vegas for $265,000 with a no money down,interest only loan.
- Thanks to the booming Las Vegas real estate market, the home doubles in value in a year.
- Wife loses job, and the couple takes out a home equity line of credit to help pay the bills that are piling up, inlcuding the mortgage.
- Couple tries to sell their home, but the Las Vegas housing bubble has burst.
- Broke and unable to sell their home, the couple takes out another $35,000 loan to pay the mortgage.
- Couple home is foreclosed on by the bank and they are now living in a camper.
- Couple blames foreclosure on lender, saying their loan docs were "confusing and hard to understand."
The bolded parts of this story are the mistakes that Gen X Finances says the borrowers made. I know what I think about all of this and if you read Gen X Finances original post, you'll know what they think too.
What do you think? Were these people taken for a ride by unethical borrowers or did they dig their own financial hole? Should borrowers in general take more responsibility for the current mortgage crisis?
2 comments:
I think there are many irresponsible buyers out there. Three years ago they tried to get us into an interest only loan for a few years until my husbands career took off and we made more money. I finally told the guy look WE MAKE X/month, and the house payment, even interest only, is most of that. Where does that leave any room for an emergency? He was like oh, you'll make plenty of money soon. Did I listen to him? NO! If anything went wrong HE would be in another career - like selling insurance or giving financial advice ha, ha. AT THE END OF THE DAY, YOU ARE RESPONSIBLE FOR YOUR OWN DECISIONS.
I bet home ownership is at an all time high. My parents taught me growing up to save, save, save so that maybe one day you can own a home. When I went to buy a house banks were throwing money at people. My parents faced 18% interest rates. My school loan is a 2.75%. It is easier to get a home now than it has been since WWII, you just have to buy homes you can afford. 30 year olds live in homes nicer than their parents. It is not because they make more money, it is because they live without any savings or safety net. They also buy houses that cost two incomes, and have no way out if one person is no longer employed.
It is now 3 years later - we are sitting on around 40K in equity, 30K in cash, a great credit score and a much better idea of our income. Is the money rolling in? No, it still isn't. We probably could have afforded the house three years ago, but who knows what the loan terms would have been. We probably would have had some floating interest that would reset three years later with god only knows what payment that we still can't afford.
Home ownership is indeed at an all time high. And good for you for going for the more affordable home and building equity.
My husband and I also almost bought a home with an uncomfortable price tag two years ago, because we thought that we would "grow into it" financially. Right as I sat down to write the contract I got a horrible feeling about it and wound up backing out. It was the best decision I ever made. In retrospect I'm so glad we have the lower payment and are able to actually afford to buy things for the house when we need to. What a novel concept!
Thanks for stopping by and commenting.
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