Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

First-time buyers see dreams fade: Easy mortgages, overvalued homes leading many into foreclosure
Indianapolis Star ^ | January 29, 2004 | Chris O'Malley

Posted on 01/29/2004 1:32:03 AM PST by sarcasm

Edited on 05/07/2004 6:27:06 PM PDT by Jim Robinson. [history]

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.


(Excerpt) Read more at indystar.com ...


TOPICS: News/Current Events
KEYWORDS: bankruptcy
Navigation: use the links below to view more comments.
first 1-5051-100101-104 next last

1 posted on 01/29/2004 1:32:04 AM PST by sarcasm
[ Post Reply | Private Reply | View Replies]

To: arete
ping
2 posted on 01/29/2004 1:43:32 AM PST by sarcasm (Tancredo 2004)
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
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.
.
.
.
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.
3 posted on 01/29/2004 1:52:50 AM PST by FreedomPoster (This space intentionally blank)
[ Post Reply | Private Reply | To 2 | View Replies]

To: FreedomPoster
/foreclosed-up/foreclosed-upon/
4 posted on 01/29/2004 1:53:20 AM PST by FreedomPoster (This space intentionally blank)
[ Post Reply | Private Reply | To 3 | View Replies]

To: sarcasm
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.

5 posted on 01/29/2004 1:59:24 AM PST by Prodigal Son
[ Post Reply | Private Reply | To 1 | View Replies]

To: Prodigal Son
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!
6 posted on 01/29/2004 2:18:31 AM PST by beckysueb
[ Post Reply | Private Reply | To 5 | View Replies]

To: sarcasm
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...
7 posted on 01/29/2004 2:31:50 AM PST by DB ()
[ Post Reply | Private Reply | To 1 | View Replies]

To: FreedomPoster
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.
8 posted on 01/29/2004 3:04:43 AM PST by I still care
[ Post Reply | Private Reply | To 3 | View Replies]

To: DB
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.
9 posted on 01/29/2004 3:09:56 AM PST by I still care
[ Post Reply | Private Reply | To 7 | View Replies]

To: sarcasm
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,
10 posted on 01/29/2004 3:27:38 AM PST by VermiciousKnid
[ Post Reply | Private Reply | To 1 | View Replies]

To: Prodigal Son
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.

11 posted on 01/29/2004 3:28:49 AM PST by Always Right
[ Post Reply | Private Reply | To 5 | View Replies]

To: Prodigal Son
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.
12 posted on 01/29/2004 3:31:30 AM PST by Always Right
[ Post Reply | Private Reply | To 5 | View Replies]

To: I still care
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.
13 posted on 01/29/2004 3:31:41 AM PST by macrahanish #1
[ Post Reply | Private Reply | To 9 | View Replies]

To: sarcasm
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.

14 posted on 01/29/2004 3:34:37 AM PST by palmer (Solutions, not just slogans -JFKerry)
[ Post Reply | Private Reply | To 1 | View Replies]

To: ChromeDome
bttt
15 posted on 01/29/2004 3:38:45 AM PST by ChromeDome
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
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.
16 posted on 01/29/2004 3:44:54 AM PST by Biblebelter
[ Post Reply | Private Reply | To 1 | View Replies]

To: beckysueb
Whatever happened to a lender saying........no?
17 posted on 01/29/2004 3:49:59 AM PST by joesbucks
[ Post Reply | Private Reply | To 6 | View Replies]

To: joesbucks
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.
18 posted on 01/29/2004 3:59:12 AM PST by Iconoclast2
[ Post Reply | Private Reply | To 17 | View Replies]

To: joesbucks
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.

19 posted on 01/29/2004 4:03:42 AM PST by Always Right
[ Post Reply | Private Reply | To 17 | View Replies]

To: Iconoclast2
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?
20 posted on 01/29/2004 4:03:49 AM PST by joesbucks
[ Post Reply | Private Reply | To 18 | View Replies]

To: I still care
It all adds up. Fast.

Roof was done to get this house ready to sell, right before I bought it. I figure I've got another 10 yers, they used a very good quality architectural shingle.

I'm about to do a window upgrade on the west-facing ones this Spring. Ought to help a lot on the summer electric bills going from single-pane to double-pane low-e, and improve comfort besides. Just replacing the lites, frames are good, and don't wan't to go through the brain damage and expense of a full rip-out-and-replace.

Plumbing and electrical I do myself. I replaced the water heater last Fall. You can really do a lot yourself, just take the time to research what you're doing, and make judicious tool purchases over time.
21 posted on 01/29/2004 4:06:09 AM PST by FreedomPoster (This space intentionally blank)
[ Post Reply | Private Reply | To 8 | View Replies]

To: sarcasm
Well, it's obvious the solution to this problem is for the mean, old mortgage companies and banks to give free homes to those who don't qualify.

22 posted on 01/29/2004 4:06:19 AM PST by VeniVidiVici (There is nothing Democratic about the Democrat party.)
[ Post Reply | Private Reply | To 1 | View Replies]

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

That is an impossible rule to live up to these days, unfortunately.
23 posted on 01/29/2004 4:14:03 AM PST by HostileTerritory
[ Post Reply | Private Reply | To 8 | View Replies]

To: palmer
What B.S. This whole article is probably B.S.

Maybe not.A few miles from where I live a man died when his house caught fire.........because of a nail driven into the wiring.Nice waterfront home too.

24 posted on 01/29/2004 4:14:04 AM PST by quack
[ Post Reply | Private Reply | To 14 | View Replies]

To: joesbucks
The lender only needs certain guidlines fullfilled-
and they are GUARANTEED payment:
1:typically home buyer needs 5%-10% down
2:The home buyer MUST have mortgage insurance!
this protects the lending institution.
The banks are not in buisness to lose money on a loan-
They are not going to send you to a nice loan officer
(from it's a Wonderful Life)- if you fail to make payments
they have another waiting.
25 posted on 01/29/2004 4:17:56 AM PST by mj1234
[ Post Reply | Private Reply | To 17 | View Replies]

To: sarcasm
This article is a great example of the "renter mentality". The latest Housing Policy dialog at Fannie Mae's website points out how housing stock in the "affordable" category has been systematically destroyed in recent decades by the thicket of "consumer protections" and "renters rights" legislation which has made it extremely costly to evict nonpaying or property-abusive tenants. The article puts the "tenants rights" mentality on display, and the first and third "Comment" responses point out in some detail the grotesque consequences of such tunnel vision: reduction of "affordable housing" availability.

You need to be able to read PDF files to look at these (Adobe PDF reader available via a free download if you don't already have it.)

http://www.fanniemaefoundation.org/programs/hpd/v14i4-index.shtml

Forum
Evictions: The Hidden Housing Problem
By Chester Hartman and David Robinson
Download article
Comment
By Michael H. Schill
Download article
Comment
By W. Dennis Keating
Download article
Comment
By Lenore Monello Schloming and Skip Schloming
Download article
26 posted on 01/29/2004 4:22:11 AM PST by Blue_Ridge_Mtn_Geek
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
Boo hoo. How many of these people went out and maxed-out their credit cards after buying the house to buy all new furniture? I guess the next article we'll be reading is how the furniture was over-priced, and can't be sold for what they bought it for when they can't pay the credit card bills.
27 posted on 01/29/2004 4:41:25 AM PST by the-ironically-named-proverbs2
[ Post Reply | Private Reply | To 1 | View Replies]

To: All
I've dealt with Beazers/Crossmans/Trinity before. They keep having to change their names, because each time they build a housing edition, there is ALWAYS problems with their homes. So they change their name to make it appear they are a new company. They are sneak thiefs and will do everything possible to build cr*ppy homes, then get out of dodge and then they go destroy another community. They could care less about the neighbors who have to deal with their shotty workmanship they left behind.
28 posted on 01/29/2004 5:06:21 AM PST by excalibur1701
[ Post Reply | Private Reply | To 26 | View Replies]

To: sarcasm
Wow, hubby and I have been in military housing for 5 years now. We are moving in 2 weeks and wont have housing as an option so we are faced with the rent/buy issue. We both really want to buy, but I just don't know that we are ready. The place we are moving to (Wichita Falls, Texas) supposedly has really really limited rental options. Apartments are out of the question. What to do? What to do?
29 posted on 01/29/2004 5:08:34 AM PST by EuroFrog (Moving back to the USA in 15 days!!! (But who is counting?))
[ Post Reply | Private Reply | To 1 | View Replies]

To: VermiciousKnid
here on Long Island where house prices have skyrocketed recently

i thought house prices on Longisland have been skyrocketing since the '80s...

30 posted on 01/29/2004 5:11:59 AM PST by the invisib1e hand (do not remove this tag under penalty of law.)
[ Post Reply | Private Reply | To 10 | View Replies]

To: quack
A nail through a wire can start a fire. A much simpler explanation in the case from the article is that the woman didn't clean the lint filter and the dryer caught on fire. Then the extreme leftist ACORN organization sent over an electrical inspector who found poor installation work so that woman could score a new dryer (and maybe some monetary damages) from the builder.
31 posted on 01/29/2004 5:30:45 AM PST by palmer (Solutions, not just slogans -JFKerry)
[ Post Reply | Private Reply | To 24 | View Replies]

To: sarcasm
This problem is not going to be limited to the low income buyer segment for long. Rising values have given buyers the false sense that the can't lose by buying "up" even if it adds a little stress to the budget. It is easy for buyers to become self-delusional about how they can cut a few corners in the family budget to keep the payments made. Reality is a different story.

Richard W.

32 posted on 01/29/2004 5:43:06 AM PST by arete (Rebellion to tyrants is obedience to God.)
[ Post Reply | Private Reply | To 2 | View Replies]

To: sarcasm
You can't watch a hour's worth of television without an ad for "easy money" cash-out refinancing of home loans. I wonder if anyone is going to own their own homes in a few more years.

In a country which used to have few brand-new, beautiful cars on the road, these days a modest old clunker really sticks out among the gleaming new purchases.

And I watch 12K ft mansions being built around me, just so the owners can then go into hock importing the illegal labor to maintain them.

On university campuses, desks are set up on registration day to sign up 18-yr-old kids with no income for multiple credit cards.

We're achin' for a breakin'--

33 posted on 01/29/2004 5:50:34 AM PST by Mamzelle
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
The Association of Community Organizations for Reform Now, (ACORN) a national activist group that represents low- and moderate-income individuals, levels much of the blame at builders of entry-level homes.

These people are serious leftist wackjobs. A couple years ago they picketed a electronic chipmaker here in Albuquerque for not hiring enough homeless and high school dropouts.

34 posted on 01/29/2004 5:54:30 AM PST by Tijeras_Slim (Come see the violence inherent in the system!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Mamzelle
It's called "economic slavery".

Richard W.

35 posted on 01/29/2004 5:54:41 AM PST by arete (Rebellion to tyrants is obedience to God.)
[ Post Reply | Private Reply | To 33 | View Replies]

To: sarcasm; arete
And the Congress is once against about to consider that bastard change to the Bankruptcy Laws which holds individuals to lifetime account for bad debts but lets the directors and officers of corporations do the same thing -- borrow money they can't pay back -- with personal immunity. A rotten law full of miseries that would be.
36 posted on 01/29/2004 5:54:56 AM PST by bvw
[ Post Reply | Private Reply | To 1 | View Replies]

To: Prodigal Son
When we bought our home, we had been advised to "pre-qualify" so that we would know what we could afford...

Well, when the mortgage we were "approved" for would have mean payments of nearly $300 more per month than we actually had at in income (after paying our existing bills), we knew what the game was.

We purchased a home that the total morgage payment actually FIT in our budget - not going past what our income was.

Unfortunately, many of the people who fall for these lenders are either under-educated, or are just plain too dumb to know the difference.

Just because you are "pre-approved" for a mortgage up to $200,000, doesn't mean you can ACTUALLY make those payments.

As far as the woman with the bad wiring in a new home that caused a fire - the builder should have been responsible. That would be a defect. So why did she have to pay the insurance deductible? This would be a LEGITIMATE case for a lawsuit - especially if the fire investigation pinpointed the builder's error.

37 posted on 01/29/2004 5:55:09 AM PST by TheBattman (Miserable failure = http://www.michaelmoore.com)
[ Post Reply | Private Reply | To 5 | View Replies]

To: sarcasm
Bring on the foreclosures!
38 posted on 01/29/2004 5:58:56 AM PST by petercooper (We did not have to prove Saddam had WMD, he had to prove he didn't.)
[ Post Reply | Private Reply | To 2 | View Replies]

To: bvw
As the banks give credit now to the obviously uncredit-worthy, conservatives should oppose any change in the bankruptcy laws.

To those that argue "personal responsibility"--it is also the personal responsibility of those issuing credit to do it the right way--to only lend money to those with a reasonable expectation of keeping up the payments.

When starting out in my own life--credit had to be earned over time and was hard to come by. Would I be in as good a shape as I am if I had been offered credit when I was so immature, had no income, had been tempted with expensive goods and promises of "easy money"...would you?

39 posted on 01/29/2004 6:05:30 AM PST by Mamzelle
[ Post Reply | Private Reply | To 36 | View Replies]

To: VermiciousKnid
Texas also has ridiculously high school taxes. Much of it has to do with location, location, location. For the previous 30 years it was equal but in less than 10 years our side of the street has tripled what the other side of the street's taxes are. Really chaps my hide.
40 posted on 01/29/2004 6:09:51 AM PST by mtbopfuyn
[ Post Reply | Private Reply | To 10 | View Replies]

To: sarcasm
"Irwin later sold her loan to a national mortgage company, which would not work with her when she fell behind in payments.

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."

I find this a little hard to believe, most fiancial instituitions are willing to work with people because foreclosure is expensive, time consuming and in many cases
the get a house back in poor condition.

Most states also have many borrower friendly legal provisions to avoid forclosure, such as one in the state I live, the lending instition can't initiate foreclosure if the borrower is making a "reasonable attempt" to sell the home. If nothing else, this women could use a provision such as this to avoid imminent forclosure and buy herself a few months to catch up on her payments if the bank won't work with her.
41 posted on 01/29/2004 6:10:33 AM PST by apillar
[ Post Reply | Private Reply | To 1 | View Replies]

To: Mamzelle
You can't watch a hour's worth of television without an ad for "easy money" cash-out refinancing of home loans. I wonder if anyone is going to own their own homes in a few more years.

I haven't owned a television in over a decade. Throwing the thing in the trash immediately innoculates you from advertising.

I don't know if it's a consequence of living life with no television or not, but I haven't gone in debt for a helluva long time either except for a small mortgage on my house. I mostly paid cash for that purchase as well though (keeping the amount I could've used to pay the whole thing in order to renovate it). If I were to want a car, I would pay cash. I can't see paying another man interest unless it is absolutely necessary. (Absolutely necessary = my wife needs an operation in order to keep living, not keeping up with the Joneses)

On university campuses, desks are set up on registration day to sign up 18-yr-old kids with no income for multiple credit cards.

Freedom is full of perils.

42 posted on 01/29/2004 6:10:58 AM PST by Prodigal Son
[ Post Reply | Private Reply | To 33 | View Replies]

To: the invisib1e hand; VermiciousKnid
LI is a national anomoly for a number of reasons, especially Nassau County. We bought in NW Nassau only five years ago for $250k. We did the bathrooms (3), kitchen, doors/windows and that's it.

A smaller house, with original everything (even a fuse box) and only one bath, from 1942 just sold for $480k after one week on the market. The buyer is going to sink @ $75k into it before moving in. The neighboring NW Nassau towns have an entry price of at least $750k.

The buyers here are for the most part first generation Asian, Indian, South American medical professionals and business owners. I have no idea what the financial arrangements are or if these folks are on the edge but we see no slow down in the near term. The rest of Nassau and into Central Suffolk has risen in a ripple effect.

43 posted on 01/29/2004 6:11:55 AM PST by wtc911 (Rocky Sullivan died a coward)
[ Post Reply | Private Reply | To 30 | View Replies]

To: FreedomPoster
$103,000 for $25,000 a year? My husband makes twice that and we only got up to $110,000. At least we know we'll be able to afford it.
44 posted on 01/29/2004 6:12:03 AM PST by HungarianGypsy
[ Post Reply | Private Reply | To 3 | View Replies]

To: Prodigal Son
You are correct, but the current situation is largely due to lenders' virtual abandonment of sound mortgage underwriting principals. When I bought my first house, fairly strict debt service to income ratios were applied, and many people were denied mortgages.

Nowadays it seems as though all you have to do is exhibit a pulse, and lenders are falling over eachother to give you a $110% mortgage.

This is classic malinvestment attributable to easy money and artificially low interest rates.
45 posted on 01/29/2004 6:12:06 AM PST by LN2Campy
[ Post Reply | Private Reply | To 5 | View Replies]

To: the invisib1e hand
there was a bit of a correction in the late 80's / early 90's -- a lot of people lost big money if they had to sell then.
46 posted on 01/29/2004 6:16:59 AM PST by LN2Campy
[ Post Reply | Private Reply | To 30 | View Replies]

To: Prodigal Son
re: Freedom is full of perils.)))

I do not agree that we should change our courts to accommodate what amounts to loan sharking. If an institution lends money to people it knows likely can't pay it back, it not only shouldn't get our help in bankruptcy court, it oughta land 'em in jail. It's fraud--to the borrower, and to the stockholders of the bank, and to the banking public.

47 posted on 01/29/2004 6:18:27 AM PST by Mamzelle
[ Post Reply | Private Reply | To 42 | View Replies]

To: bvw
And the Congress is once against about to consider that bastard change to the Bankruptcy Laws which holds individuals to lifetime account for bad debts but lets the directors and officers of corporations do the same thing -- borrow money they can't pay back -- with personal immunity. A rotten law full of miseries that would be.

As a country, we used to work to get ahead. In the future, we will work to get even. Fewer good jobs, less opportunity, destruction of the middle class and personal savings and national wealth all for the NWO central planners.

Richard W.

48 posted on 01/29/2004 6:19:42 AM PST by arete (Rebellion to tyrants is obedience to God.)
[ Post Reply | Private Reply | To 36 | View Replies]

To: joesbucks
worse yet, what will he say when we won't or can't provide the pump to bail him out?

It might sound cruel, but you might want to sign an agreement now that you won't help then. At least have it out in the open verbally. I would sit them down and talk them about it and explain exactly why I was taking that step too. That a few extra years don't just add up to age but wisdom as well and you seem him about to make a mistake.

It might be just the thing they young man needs to open his eyes before it's too late and he's gone off and signed himself up to something that's going to kill him financially.

49 posted on 01/29/2004 6:19:55 AM PST by Prodigal Son
[ Post Reply | Private Reply | To 20 | View Replies]

To: apillar
By working with her, she probably means much more time than 3 months. On $25,000, she's having big trouble making any payments --- much less 3 months payments plus interest.

I think some of these people are better off walking away ---- there is no way they can keep these mortgages going.
50 posted on 01/29/2004 6:20:29 AM PST by FITZ
[ Post Reply | Private Reply | To 41 | View Replies]


Navigation: use the links below to view more comments.
first 1-5051-100101-104 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson