Before 1950, it was rare to have a mortgage. But if someone did have a mortgage at that time, it was not a thirty year mortgage like they are in present day. Never were they for the entire value of the home. (Most are now with a 0-5% down) People would buy a house for $15,000 and pay $10,000 and the remaining $5,000 would be mortgaged and paid off over a short time. The people who bought the home actually owned it instead of the bank.
Fifty-two percent of Americans are living pay check to pay check causing them to be at risk of foreclosure. Although foreclosure is a growing problem, with the proper background checks, more government programs, and renting before buying the foreclosure crisis can be solved. Recent years have proven that getting money to buy a home has become extremely easy. To qualify for a loan all one really needs is a checking account and what a lending association considers “good” credit. Mortgage companies, banks, and other lending associations -in my opinion- are giving money to those who can not afford the loan’s repayment.
This leads to people taking loans from banks. The interest on these loans causes you to pay back more than you borrowed. This causes people to fall deeper into debt. Another source of debt is credit cards. Many people use credit cards because they don’t have the money to make their purchase when they want to.Credit cards also collect interest and the television that cost two hundred dollars at Best Buy has now cost you almost four hundred dollars.
Without having established credit there will be no way a potential home owner could qualify for a mortgage. The American dream of owning a house has also seen Americans taking on more than $8.8 trillion in mortgages, up an astounding 42 percent since the 2001 recession. The fast run-up in prices in recent years has made many homeowners feel wealthy, so they can ramp up day-to-day spending. Millions of Americans have taken advantage of low rates in recent years to refinance their mortgage, which has resulted in $715 billion (2005) borrowing against home equity. It seems as if though in America and many other developed countries living a life without credit seems impossible to do.
The American dream of owning a home is beginning to elude many individuals, and it is questionable that all Americans should own a home. Many individuals no longer can afford or even want to own a home because of rising homeowner yearly taxes, and interest rates that make paying down the principal of a mortgage almost an impossibility. As a young person, I question whether it would be in my best interest to burden myself with home ownership because of the unstable economy and vanishing job market. I think that it is a good idea for most people to rent a home instead of buying a home. In the past it has been too easy for the American consumer to avoid paying their debts because the “easy out” has been to declare bankruptcy and be completely excused from their debt, and even being able to keep their home in the process.
Due to the severe decline in housing prices, people who bought their house about five years ago are paying more than the house is worth. They are paying a mortgage that fits how much that house was worth five years ago. On top of that, the homeowner likely has a decrease in net income, an effect of the recession. Part of my solution to end the crisis would be to have government regulate mortgage rates. It is not socialism to have government step in when necessary and clean up the mess that the free market system had made.
In the process, consumer spending has suffered mightily and deepened the recession as Americans have seen the value of their most important assets, their homes, are falling in value. There were a lot of different factors that went into the development of the problem. There was buying a house that cost more than the people could afford, and there was taking on a mortgage payment that had monthly payments that were really high. There was the problem, too, of people who had no savings after they bought their house, so if anyone got sick or lost a job they couldn’t make their payments. Finally, experts are not sure of the solution to the foreclosure problem.
There is too much credit out there and it is getting people in trouble. Yes, someone may have an amazing credit score, but look at how they got that score. Most it is credit cards they might be making their payments on time now but what about when you add a $1,200.00 a month mortgage to their bills. Not to mention taxes, utilities, insurance, and all their other expenses. Like cars, kids, pets, gas, and leisure.
After two years of straight interest payments, and pure profit for the financing company, the loan payment begins to escalate. So, the consumers dream home must be sold or refinanced in order to avoid the cost of the outrageous increasing payment to the greedy lenders. These loans helped the mortgage companies do well, but the dream home will cost more than ever dreamed if the loan is kept. For the stressed out homeowner this payment is often unaffordable and although the corporation may do well the consumer is left in d... ... middle of paper ... .... This mindset needs to be changed in our society because it is a stressful and deceptive way of life.
Although the insurance is used to help the mortgage company in case of default, it can be an unnecessary burden on the homeowner. The elimination of the insurance will reduce the payment by a minimum of $100 each month. That will help the homeowner tremendously in both the short and long term of the loan. Finally, the lenders should make sure the homeowner can afford to pay for the house they are interested in. So many people were placed in houses that were well above their means but because of greed this has caused a lot of people to lose their homes.