How I Lost 12.5 Pounds & Regained My Soul

Naked, as in truth, and uncensored, I share my daily quest to survive as a woman and artist, while dealing with the complications of a full life, meddling in politics, loving my children to excess, totally permanently married and on a never-ending diet. While my soul is in constant need of repair and redemption, I struggle to do the right thing. In the meantime, let's all double the love. (Love, not sex, you fool). All posts are copyrighted material.

Thursday, May 17, 2007

For the wanna-be homebuyer, life is filled with irony...

Good morning, my delicate little debutants~

Today I read the political news with regard to my industry, mortgage originations, and realized that the first time homebuyer never gets an even break. For instance, as prices were escalating into the skyline, the panic that ensued with new buyers was absurd. Instead of waiting six months or a year to perhaps solidly posture themselves until they could easily be ready to buy, they accelerated their purchases and ended up with horrible loans.

How horrible? Well, you pay an interest rate of 1%, 1.75% or 2% for a month to maybe six months, and then your interest rate jumps to 7% to 9% while you continue to make payments at the lower rate. The naive were sold on this abomination of a mortgage because they were naive first and foremost, but also because they were greedy.

That dream house, that was already much too expensive for them as a first purchase, would be sold to someone else. Their friends, relatives and parents generally looked on in amazement. How could they have two huge car payments, a couple of kids, daycare and still afford that house?

Well, the reality was, they couldn't. They were just floating their lifestyle the same way this generation (and their baby boomer parents) have lived on credit. It was a consciousness that was raised in the 1980's when if you did wait? Inflation was double digit and so we all thought if we didn't buy RIGHT NOW we would end up indigent.

Ironically, in those days people got annual raises, minimum wage was increased gradually, and one could expect in a career not to max out by thirty. It was a leap of faith, but a reasonable one. Well now we have a different economy. Wages didn't really go up, although stock portfolios did. With so many investors, even lousy stocks showed good returns, and so Boomers again thought they could live the high life, and some actually did.

So now we have their kids to finance in homes and what happens to all that extra interest that is not being paid on those horrible loans? Why it gets added to the principal loan amount originally borrowed.

So eventually you owe $250,000, although you made your payments as required and only borrowed $200,000 in the first place. But the trouble starts long before you reach the maximum "negative amortization" amount of 25% of your original loan. Nope, the trouble starts when you reach 110% or 115% of your original loan, because that is when the lender re-amortizes your payment (raises it) to pay just a portion of that interest.

Well, don't worry, my little newbies. Although that loan is still available and being hawked across the country, at some point soon it will also go away. Why? Because the housing market is expected to make a national downturn - oh some places won't experience it locally and all real estate is local ultimately - but that will be the only thing that helps new buyers.

Real estate is like everything else a great number of people value. It is one of the true inflation busters. Yes, your money is worth less, but your house is worth more. So when lenders tighten up the market - because they have been idiots in what they have been doing - everybody panics.

The good part, though, is that qualified buyers are in a good position because the sellers are humbled and the other buyers can't compete. So we end up back to exactly what the market has always been. Cake, but only for qualified buyers.

Once incomes catch up to the cost of housing there will be another boom, but the way things are going? I think the qualified buyer now has the bull by the horns. The buyers who are not qualified will have to do what they always did. Straighten out their credit, pay off their bills, stabilize their income and save their down payment. Yes, and delay buying a house until they have managed to create some real ability to finance it. Now, I am not saying it has to be easy to make those payments; it just has to be possible.

And if they don't? There is no free lunch. Lenders do not make loans that don't earn them lots of money. And if they feel there is a high risk involved? They want even more return and they know all about small print, what is legal, and what they can get away with during this administration of pillagers.

So the consumer has to be smart. Renting has its benefits when it is cheaper and easier and affordable. Otherwise, eager-beavers might end up with some horrible loan product, conceived in the minds of the devil's minions, and not be able to make their payments when the adjustable rate moves up.

You can actually buy a house, even if you are ninety. Most people don't know that. They think there is some magic age in which they have to buy or life is meaningless. I know, I was that kind of buyer. Luckily I didn't buy above my means and didn't lose everything. Oh, I would have done it, but my husband wouldn't because he had the two components I didn't. Patience and common sense. (You see, I know how it is. At twenty-seven I would have sold my soul for a house had he not reviewed the contract.:)

Oh, I'm not dissing anybody and I'm not one of those "I have mine" people. I'm just sad that the wolves doing the marketing that tempts people to go against their better judgment is so easily clothed in a nice wool suit and some nice leather shoes.

Clark County Diva

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