Thursday, 18 September 2008
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Creative Financing: Bad News for Home Owners and Renters
by Mama Pig
About four years ago hubby and I decided we should think about purchasing a home. In Southern California, renting is not an uncommon occurrence, but we wanted to put down some permanent roots. We began researching the housing market and were quite shocked at just how outrageous the pricing had become. A small three bedroom with no yard that backed up to a grocery store was selling for 500,000. Yes, that is right, a half a million dollars for less than 1500 sq. ft.
Undeterred, we began to look in earnest. I found a home that seemed like a nice starter and contacted the realtor. He in turn introduced us to his "friend", another realtor. Hubby and I thought we were on pretty solid ground. We had a fairly decent down payment, a better than average credit rating, and a strong desire to buy. In other words, we were a perfect candidate for the predatory lenders.
We had a firm figure in mind that we knew we could afford monthly and were adamant in sticking to that figure. Our new realtor had other ideas. He kept telling hubby that he could simply "state" an income and would have to provide no documentation. He also was telling us how to boost our credit rating falsely. Fortunately, hubby was not biting. He and I sat down one evening and he said he was not comfortable purchasing anything in this manner.
Fast forward four years; we decided to forgo buying and rented a home instead. We lived there almost two years until a divorce caused the owners to move back into the property. Seven months ago we moved into our new home, another rental. We felt lucky that the owners were looking for long term tenants and had no worries. We had escaped the predatory lending fiasco.
Not so fast. Recently we learned that while hubby was quick enough to sense a problem, our landlords were not so lucky. Since we moved in, their mortgage has doubled and they are unclear if keeping the home is an option. I am thankful that we had landlords responsible enough to make us aware of the problem and allow us the opportunity to begin our search for a new home. I have heard many horror stories in which the renter found out the house had gone into foreclosure only when the bank came in and changed the locks.
So, for us we are off on another house hunt. It seems that the creative financing is causing problems even for those that did not fall into it's trap.
Do you have any home horror stories to share? Have you ever had trouble buying or renting a home?
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Comments (13)
That's horrible that you got caught up in it, even though you made the decision not to take on such a mortgage yourself. I had never thought about how it could impact renters!
I didnt think they could legally just come change the locks... interesting. Wouldnt they have to break in to be able to do that in the first place?
Sorry to hear that other people's bad choices have left you in a bad situation!
My finance and I have never owned a home. We were interested to see what we were in for and started testing the waters earlier this year. With the horrible economy, we are not even close to being potential homeowners. We have done tons of work to clean up some credit issues and are on our way to saving up a down payment.
well for us we are good we did things right the first time around, but beofre we even went into looking at houses we sat down with a finacial consultant and our fathers and our lawyers (luckily for us all these people are family!) and went with the fixed rate single mor. but friends of mine had a flex arm and now are in serious trouble with twins and maybe more twins on the way they are barely able to make all the bills at the end of the week let alone gas and food!
Oooh, that's a pet peeve of mine: both lenders and borrowers who agree to ARM mortgages without realizing (or explaining) the possible consequences. Why do you think this country is in the "housing crisis" that it is now? ALWAYS get a fixed rate, ALWAYS! And then if interest rates drop, the chances are you can refinance! It's not that hard, people, really.
So yeah, that's what your blog reminded me of.
Sorry Mama Pig.......I've been in the mortgage industry since 2002 and I've seen some awful behind the scenes work from lenders, account executives, and even realtors. Some people were not meant to be homeowners but with all those stated programs, the housing crisis was going happen sooner or later. I believe it started from Bill Clinton's campaign that all Americans should be homeowners; "Fighting for the Forgotten Middle Class’ campaign so that middle class americans can be homeowners. As we've witnessed, not everyone should own a home.
My ex-husband had a similar issue when he re-financed and took out an equity loan. He did it all over the phone and the person on the other end of the phone gave him false information; saying that the insurance and taxes would be factored into the mortgage payment as it had been before. They were not. His payment jumped from $700 a month to $1,000 a month and no longer included those two precious things. When we were together, we were barely keeping things a float and trying to figure out what we were going to do if we wanted to start a family. Then I caught him cheating, moved out and he couldn't make it on his own. I think they're still in the foreclosure process...they were sending me updates because I was legally his wife when he resigned, but I made it clear that I had no interest in the property and they stopped.
@der_lila_Stern@xanga - In Florida, they can't. They have to send a process server to the address with the foreclosure paperwork to serve any tenants. Now, if you get this paperwork, call your landlord, and they say they've corrected the problem; not to worry about it and you believe them without further research into it? Then I think you're setting yourself up to be kicked in the buttocks when they come out to change the locks. The process takes at least six months from the time that the owners stop making payments...they have to be at least three months behind on payments before the bank starts the paperwork and then it takes another few months...probably more with the volume that's going on right now...to get it to court and have the house declared legally given back to the bank.
We just bought our first home in June, & the process went smoothly. We've never had any issues renting either.
I am a little nervous about all of this. I bought my first "property" at the end of August. I bought it with about 50K still "available" as far as what I was approved for.... Now. My property is really just that... no home. It had a trailer that was in really bad shape. We knocked it down. Now I need something to live in and need to find something that will keep us under my total limit. I am very nervous that I am going to get trapped into something that sounds good and really isn't. Right now I have a high interest rate because the bank "fenagled" a home equity loan... NOT a mortgage for me to get the property in the first place. Hopefully, (the plan is) I will be able to refinance once I find a home to put on it (probably a double wide) and put it into a regular mortgage. A FIXED mortgage for sure. I am just very nervous now. So far things have been going smoothly and I guess I should still think that way... thinking negatively isn't going to change anything. I just get so scared with how these lenders, etc are trying to make a "deal"
I'm up here in NorCal, and it's just as bad. We looked into some townhomes and condos before purchasing our house, and I can't believe how much they are. The bedroom seriously only had room for a bed. And you have to pay HOA on top of that.
i'm looking for a place to rent, preferably under $400/month. bull. theres nothing in mid ohio for that...i'll have to keep looking...*sigh*
Right now, you should buy a home. Look at foreclosures, as banks literally are taking 1/2 of the listing price!! That's my best advice.