Vent: Bailing out mortgage holders getting out of hand?

[MattH]

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@Anonymous wrote:
yes, i'm a single mom in the process of buying my first home.....but i have always cover myself since my daughter was born.  i have life insurance polices on my dog, my daughter and myself including renters insurance and knowing that i'm a single wage earner i also have disability insurance through my job's union and a private one and i spend less than $100.00 a month for all of them.  I believe when you become a homeowner single or married you have to cover all basis and i knew of a lot of homebuyers during the crazed market that didn't cover themselves and even today their comment is always can't afford it..  i believe that it should be included in your DTI when your purchasing.  i look at it like this if lenders require you to pay PMI to cover their investment...why in the world wouldn't you as a homeowner not cover your investment by purchasing any and every policy that will assist you if needed!

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Very wise, it sounds like you are doing the responsible thing making sure your daughter will be covered.

[Anonymous]

yes, my daughter is 10 years old & it's so bad that my family & friends tease me make that when i get old she's going to put my in a nursing home in a room with no windows and live off all my money Gotta luv her!!

[cgmiller63]

When my husband and I went to purchase our house in 2001 we were pre-qualified for a large amount based on our combined income.  We were uncomfortable with the idea of a large mortgage so we asked them what we would qualify for based on just my husband’s income and that was the price range we looked at.  We purchased our 1450 sq foot house in California for $236K with a 30 year fixed mortgage.  A year later we refinanced to a lower rate and went to a 20 year fixed mortgage. We did not take out any equity. 15 years from now our house will be paid in full. 

I was laid off in April (10 years with the company) and we have been able to comfortably make our payments.  As a matter of fact, we just did some home improvements our house using cash only.  Okay,  I did not get granite counter-tops or stainless steel appliances.  I got nice Italian porcelain tile on the counters/floors and regular white appliances.  Our kitchen cabinets did not get replaced, but got a fresh coat of paint. I purchased a lot of things on E-Bay or discount stores. 

During this time, everyone around us was taking out equity and buying new toys or remodeling their houses.  Now these same people are complaining about how broke they are or how they can’t make their payments.  I don’t feel sorry for them nor do I feel we should bail them out.  I do feel for those who had an illness or death and feel something should be done to help those people out.  The lenders and borrowers should be investigated to see if they perpetrated any fraud.  If they did, they should be prosecuted. 

The bad part is that every one of us taxpayers will have to pay for the bail-out. I feel like we are being punished for doing the right thing. 

By the way, I still have not found a job and we are still current on all of our bills….planning ahead really works - go figure!

Message Edited by cgmiller63 on 10-12-2008 03:11 PM

Message Edited by cgmiller63 on 10-12-2008 03:13 PM

[JeffWeico]

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@MattH wrote:

I think a lot of people made the mistake of comparing rent payments to mortgage payments, forgetting that owners have to pay for a lot of stuff that's included in the rent.  Here are just a few of the things my wife and I have had to buy in six years:

Furniture

A/C Compressor

Hot Water Heater

Toilets

Furnace

Dishwasher

Range

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Matt,

You left out a bunch of stuff...

Property Taxes

Water Bill

Garbage Pickup

Gas Bill (some landlords pay for gas)

Insurance

Alarm

and on, and on...

[MattH]

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@JeffWeico wrote:

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@MattH wrote:

I think a lot of people made the mistake of comparing rent payments to mortgage payments, forgetting that owners have to pay for a lot of stuff that's included in the rent.  Here are just a few of the things my wife and I have had to buy in six years:

Furniture

A/C Compressor

Hot Water Heater

Toilets

Furnace

Dishwasher

Range

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Matt,

You left out a bunch of stuff...

Property Taxes

Water Bill

Garbage Pickup

Gas Bill (some landlords pay for gas)

Insurance

Alarm

and on, and on...

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Yes of course, the list is long.  Any first time homeowner should spend some time talking with friends and relatives to form a realistic idea what it will take.  During the boom, people tended to buy way above their heads on the assumption they could just do a HELOC or cash-out refi every few years since values would keep going up.  For a while it seemed to many people like the financial equivalent of a perpetual-motion machine.  Some time last year I read a very interesting NY Times article about four families who were NOT at risk of foreclosure, who still had substantial equity, but who were cutting back on major spending plans because they wanted to preserve the equity they still had.  The article basically said, these people are not the sort of people who make the headlines by losing their homes or anything, but for every homeowner who ends up on the street there are probably 10 homeowners who postpone some major spending.  Which will have an economic ripple effect.  As I recall, the deferred plans described by the folks in this article were stuff like buying an RV, adding a room, remodeling a kitchen, and so forth.

I never thought of my residence as anything more or less than a place to live; when my wife and I bought in 2002 I ran a rent-versus-buy spreadsheet that ASSUMED there would be a housing crash at some point because even then price-to-rent ratios (the housing equivalent of the stock market's price-to-earnings ratios) were significantly above their long-term averages.  The main surprise to me was how long the boom continued before it collapsed, I had expected the crash to come somewhat sooner than it did.

Even after the current crash has finally run its course, I think we face at least a decade of lowered expectations in much of the rich world as people (1) pay down their debts or go bankrupt, (2) adjust their investing strategies to avoid risk, and (3) actually save for retirement instead of assuming their homes will magically do the job for them.  Since we as a nation have been spending a lot more than we make for a long time, we are now gonna have to spend a lot less than we make for a number of years.  Even if we do NOT have a drop in output, that simple equation will force the average American to live on much less, and if we do have a bad recession that means we'll have to spend much less than we make AT THE SAME TIME as we are making less per capita.