[QUOTE=S2020,Feb 5 2008, 12:18 PM]that's nothing.

 

You are smart though.


People get bitten in the ass often by bad investing. They take a chance without worrying about the consequences.

We were making about 70k and bought a 300k home on a 5 arm. We sold it for 500 k. The next time we bought the house is 2x our income and a 15 yr fixed.

 

Depends on where you live. $175k gets you a nice, relatively new, spacious house in Texas. It gets you a garden shed here.

My wife and I are at a little over $100k, and we are trying to buy something in the $250-275k range. Even with basic requirements (3BR, 1.1/1.5/2 Ba [two shitters], 2 car garage and a basement) it's difficult to get something that doesn't need a TON of work in that price range. We looked at a decent place 2 weeks ago, 30 years old, no basement, but in the best school district; it had the original furnace, A/C, and windows, so it needed about $12k worth of work before we touched the nasty carpets, paint, trim, etc. It was listed at $279k, agent thought we could get it for $270k. We walked.


But yeah, responsible buyers like us trying to buy a reasonable house are getting screwed by all these $50k millionaires.

 

$25/hour * 2000 hours/year = 50K/year

 

I have no idea on where he gets his money. All I know is I went to an optician's house that's HUGE! He proudly said it's a cool million. Since I used to work for the same boss as this guy's I know about how much he makes.

 

A lot of people are to blame and don't let the lenders off the hook. Trust me, they knew exactly what was going on even if the dumbass consumer didn't.

In the battle for greed there are many losers. The recklessnes of the major banks have shattered their earnings, reputations, bottom line, and stock prices.

Both the consumer and the banks will pay the price, but the often to blame middlemen paid on commission are mostly off the hook-they should be fined and some brought up on criminal chargers.

There were a lot of people heavily leveraged with no hedge against their bet, and it may take a while, but ANYONE who keeps that up will have to pay the piper.

 

The problem is three fold. 1) the Government altering lending rules with the goal of allowing everyone to achieve the american dream.. which some how got warped into everyone owning a house. Also, the FED arbitrarily setting interest rates (waaaaaay too low) that spurred massive malinvestment. The government set the stage for a massive bubble with their poor monitary policy. 2) Lenders certainly preying on morons. 3) Millions of ****ing morons not knowing a ****ing thing about money. I'd say the burden of guilt lies with #1 and #3.

 

As an industry insider gawd what I could say about that, but I can't print it. I will say that they did bend to pressure by a specific minority organization so as to appear to be PC. Do a little research, you will find one organization's name will keep cropping up. They have a big lobby and a couple of big mouthpieces.

It simply does not make sense to give loans to people who do not show a willingness to pay their bills as evidenced by their credit reports. If they haven't paid their bills in the past, why would you expect them to suddenly change and pay their mortgage?

It also does not make sense to make 100% loans under any circumstances! (the foreclosure rate on 90% ltv loans is double the rate on 80% loans. 95% loans are over 3 times as likely to end up in a foreclosure than a 90% loan and a 100% loan is, well ... as we are seeing now, close to 100% likely to end up in a foreclosure) Back in the 70's we had the same situation. I lived in a subdivision that had a 99% foreclosure rate. At one time I was the only occupied home in an over 400 house subdivision. There were neighborhoods all over like this. You got into a home for $300 and your payment was based upon your income. The bottom line is that unless you have money to lose it is too easy to walk away from your loan.

Stated income loans and stated asset loans were designed for people who make more money than their income tax returns indicate, like self employeed or commissioned people. People who write off a large portion of their incomes, not salaried people.

As far as investment properties. The foreclosure rate on investment properties has always been nearly double that of owner occupied properties. I have no sympathy for the people in the article whatsoever. If you get yourself in trouble due to your own ignorance then you deserve what you get. I have seen a great number of people invest in rental properties and very few come out ahead or at least enough ahead to make it worthwhile. Those that do work it like a business and are ruthless about what they will buy, the loans they take out and who they rent to.

As far as "the government" altering the rules....well lenders didn't have to liberalize their own rules. They could have choosen to be financially responsible. The big companies you see floundering right now, we will be better off if they are allowed to go under.

 

Sure, but you're looking at (at most) 2.75x your salary. The other family was looking at roughly 5x their salary (with kids and other expenses you don't have right now, I believe).

My condolences to those that live in a high-cost housing market but that doesn't change a thing as far as I'm concerned. If you can't afford it, you can't afford it, period. If it means living in a crappy neighbourhood while you rent for a few years, that's what needs to be done. It's just that simple.

My rent more than doubled when I moved from Canada to the USA. I didn't go out and try to maintain my original size of apartment because the rent would have tripled. I downsized to match my budget and waited to buy a house. You're doing the same thing, from the looks of it.

 

Does this apply to loan programs such as FHA and VA? I am eligible for a VA loan, and we are thinking of going that route in order to put some of our savings into improvements in the house.