Foreclosure Crisis: A Lack of Knowledge

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The foreclosure crisis all boils down to lack of knowledge. Real Estate as any other investment entails risk and uncertainty. No one can foretell how much return an investment will make, or even if there will be a return at all. Risk is only matched by the size of the investment, where higher risks are taken for investments that have a higher possible return. That said, as Real Estate will undoubtedly be the largest investment for most of the population, it will definitely have the highest level of risk for most people in the population. Risk will be inherent in any investment as no one can be certain about the future; however risk is maximized by ignorance and minimized by knowledge. It is ignorance that has led to ill-advised home investment during the foreclosure crisis, and it is only by alleviating ignorance and education the population on real estate, along with other facets of personal finances that effect the affordability of this real estate that we can move forward from the mortgage crisis, and better yet, never repeat this tumultuous point in the nation’s history.

One may ask, do we create a whole new system to teach finance' class='brand-secondary'>personal finance or modify a system that is already in place? Also, is it possible to education a significant portion of the population? According to the US Census Bureau, in 42 of 50 US States, at least 70% of adults have graduated high school. As a common medium for a large portion of the population high school is a prime option to expose many to personal finance through the US educational system. However, our current system must be modified in a way that will readily incorporate personal finance.

In many high schools there are required subjects such as English, Science, Math, and various social...

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...and most importantly how much money in access of that already being allocated to needs is available for other payments. This is crucial in part because lenders do not ask for all expenses. Lenders will ask for income and structured payments, however there may be bills that consume one’s income that are not accounted for in the original loan qualification assessment. The educated consumer can fill in the shortfall of the lender and have a structured idea of what they really can afford rather than the maximum loan they qualify for.

Knowledge is always Power, especially in the course of investing. If we invest in a mandatory financial knowledge base for citizens at a youthful age, prior to when the bulk of their financial responsibility is acquired, we can create a culture that will make astute decisions, and reduce the probability and overall rate of foreclosure.
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