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You don’t need a college degree to know an ADJUSTABLE rate mortgage will “adjust” in the future.

An Interest Only mortgage seems simple to understand…it is rignt in the title INTEREST ONLY.

7 Thoughts on Why did so many people buy houses they couldn’t afford?
  1. Reply
    Pam H
    November 13, 2011 at 5:39 am

    Shortsightedness. Wishful thinking. Heads in the sand. Allowing themselves to be hoodwinked.

  2. Reply
    Megan B
    November 13, 2011 at 6:38 am

    I agree. But a lot of people these days buy now and think later. There is a lot of credit card debt as well. There are parents of kids at my school who are on Free and Reduced Lunch, never pay for field trips, but drive SUVs and wear Nike, have Prada, and wear diamonds. Some people feel the need to look wealthy. It is all about priorities and education (lack thereof).

  3. Reply
    kansasjenni
    November 13, 2011 at 7:05 am

    I think a lot of realtors and lenders try to paint a pretty picture for the buyer. Those people don’t care about foreclosures, it’s just another house they get to sell and make commission off of. People are told they can afford so much of their income to purchase a home. For example a person who makes 100k per year might qualify for a 400k loan. The cost of the loan and interest is pretty low, add taxes, insurance and any other lender required insurances and the price almost doubles (depending on the area). Then you have the ARM. This caused lots of people lots of problems. I mean truly, most people don’t read the fine print and if they did they (we) probably would not understand what it means anyway. The creditors/lenders don’t care about this, that is why they advice buyers to hire an attorney – but most hardly have the down payment let alone another $ 350/hr on an attorney. You can’t blame Americans for wanting to own a piece of the American dream, were all pretty trusting at times and most would never thing that someone would take advantage of us especially when we thought they were suppose to be on our side. Realtors make commission on the sale price of a home, so of course, they want to sell for the highest price possible. Lenders don’t care either they want the highest loan because they charge 1% for lender origination fees. So when you have so many people you think are on your side saying there are trying to help you get a good deal most of us believe it, but it’s simply not true. People don’t buy houses they can’t afford, lenders and realtors sell cheap houses at the highest price to make more money and sales people are sales people, they all want their money.

  4. Reply
    sheila021
    November 13, 2011 at 7:07 am

    I’ve worked in the mortgage/real estate business for a few years now. with many people with not so good credit will go to a mortgage broker and the mortgage broker would do anything to be able to make money off of that person- brokers make money on the front end and on the back(hidden fees) and so they would sell them any kind of product they could. A lot of times, brokers would tell someone that it’s an adjustable rate and they would be able to refinance after a few years before it adjusts, but when it was time for them to refinance, they weren’t able to either b.c the house didn’t appraise high enough or their credit is still not good enough. with Interest only does seem pretty simple, but let me tell you, mortgage brokers are like car salesmen. I had one try to get me to refinance and do interest only, but I once I thought about it after leaving him, I knew that wasn’t the way to go…
    Anyway, I hope this info. was helpful for you to understand a little…

  5. Reply
    Datlady
    November 13, 2011 at 7:44 am

    I don’t have one of those loans but I know most people didn’t understand how much the interest could rise. They expected it to go from 5% to 6% to 7%. They didn’t expect numbers like 15%. Peoples mortgages are doubling instead of going up a couple hundred dollars. They could afford the house at the price they thought it would settle on, but they could afford it when it changed so drastically. It was alot of peoples shot at homeownership when it never seemed possible before.

  6. Reply
    bob shark
    November 13, 2011 at 8:36 am

    Greed

    What would you think about houses going up 20% per year
    Teaser ARM,s with low rates for 2 years, no down payment, no having to prove income.

    Thought??? Buy a house at low interest only, no down payment and sell house for 40% profit in two years before interest rates reset.

    THAT IS WHY IT HAPPENED…all because the government opened the floodgates of money after the .Com bubble of 2000 and lowered interest rates so far to keep economy from crashing

    And the gov’t didn’t learn, they are doing it again…look for High inflation in a few years.

  7. Reply
    sandy d
    November 13, 2011 at 9:04 am

    because the greedy mortgage companies somehow convinced all the idiots that they could afford a house double or triple the cost of what they could really afford. and because everyone wants the biggest and best they fell for it. the only person who truly knows what they can afford as a monthly payment is yourself. but the mortgage approved a person with a thirty thousand dollar a year job for a two hundred and fifty thousand dollar house. it really doesn’t say much for the intelligence of the general population does it. greed and wanting to show off is what caused it in my opinion, that and stupidity.

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