Forced savings and Expectation that the Property price will grow faster than the interest component of Mortgage !Why do people buy a house and mortgage themselves up to the eyeballs when they clearly cannot afford it?
greed
It is called the American Dream - home ownership. You can't blame people for wanting a home of their own. However, as a Realtor, I try to educate my buyers, sit them down, explain to them that they should get prequalified so they are not disappointed later. I usually can get a pre-approval in a couple of hours through my lender - The majority of my clients believe they can afford less of a house than they actually can, so by doing this, we all save time and money. I have never seen anyone who was that close to the edge of affording the payment - but I have seen alot of folks lately who have been affected by predatory lending, and second mortgages that put them over the edge - I think that the people you are referring to just do not understand what home ownership entails - you can't judge them as a group - each circumstance is different - there is also life's unforseen little roadblocks such as loss of job, death of one of the parties, illness, etc...
they fall for the marketing spree of the loan lender
';es'; said it pretty well as far as I can tell. I am not a Realtor and don't claim to know everything about it, I am however a banker and I am quite knowledgable about the financing process. Many people have eyes bigger than their bank accounts and they feel they are entitled to have what they dream, and they are... until it gets to the lender who's job it is to decide if they can indeed afford it or not in the real world of paper as opposed to the buyers' emotional wants or needs.
Many lenders got very loose in the bursting market in the recent past, and now we are paying for it. The days of no income/no asset qualifications at 107% (yes 107% of value, it covered closing costs and even half of the real estate brokerage fees on purchases) with zero down are over. I am glad. Now you have to qualify for it according to rules and there is no personal aspect there. paper is paper, proof is proof. If you don't qualify for that $1.2M loan I will tell you what you DO qualify for without worrying about whether or not you can make the payments to us later.
What you WANT is one thing, what you GET is usually quite a bit different. The problem in the recent past has been that what you wanted, you could get even if you couldn't pay for it. That is changing, fast. We have seen the error of our ways as a credit society. The only question now is how steep will the price be?
This is not the first time that real estate prices have fallen, equity is lost, and buyers give their keys back to the lenders. However, it is the first time in history that these loans have been packaged into complicated financial vehicles, and peddled as investments with triple A credit, when they are nothing of the sort. We'll be paying for this, for years to come. Those people who took these teaser loans knew they couldn't afford the reset rates. They thought they'd make big bucks because the value of the house would just go up, in a straight line. That's not how it works. These are people who are impatient-they want a big house, big profits, and don't want to work for it. Years ago, we called it champagne taste on a beer pocketbook. They felt ';entitled';. You know, when you tell a prospective buyer you don't think they can afford a particular property, they get insulted. They didn't want to know the truth. They'd rather borrow hundreds of thousands of dollars, and not even be able to make a repair if the heater goes out, than face the truth--they should be living in an apartment, with fixed expenses, saving money to fulfill their dream of home ownership.
It doesn't start out that way for most. It usually goes bad due to loss of job, pay cut, rise in household expenses, etc.
After the mortgage reforms, it is unlikely that someone can get a mortgage without being able to afford it. Before that there were plenty of shady lenders.
There own wish . Who are you ???
Its not a question of mortgaging themselves. It is always beneficial to buy a house and rent it out as it takes care of the loan amount up to 70% and rest amount becomes ur investment for which you always get better profit than any other investment. In case ur not able to pay the balance 30% anytime you can sell off the property. Land is always limited and hence if you can invest on it you will always fetch a good amount and will never be a loser.
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