Well listen to Dad. House values do not always go up as we saw in the 2008 crash or whenever it was. If you have equity, you can usually weather the storm. I’ve never bought a house but have built several. Sweat equity and a 25% down requirement insures equity. We’ve been lucky with decent timing.
I read last night that there is a 17% national default rate on homes. If you are under water you are in trouble if you have an income adjustment. If you have equity you can always sell at a profit. The next article after that was the shortage of school bus drivers paying from $24 to $29 an hour. Sure not full time and have to have your bus endorsement but an extra hundred a day can mean a lot. As a kid, one of the drivers worked at theb Pure gas station but drove morning and night. Just sayin.
My dad always had a second job. We advised each other and tried to advise the kids. When dad built in 1965, it took several years to get rid of the old house. Finally did it on a contract to a couple that couldn’t qualify for a mortgage. If you have equity you always have options.
My second job was army reserves. Everyone finished training as an E4. After a few years you could be an E5. At that level camp and weekend pay provided a little buffer. Only the leadership got E7 which was a reasonable pay level. At the tim3 I wasn’t happy but it bought new clothes for the wife. Don’t tell m3 how hard things are for the kids although I have sympathy.
Things have changed since the days when Banks, Credit Unions & S&L’s made mortgage loans and actually held them in their portfolio until it was paid off. Banks & S&L’s didn’t want to make risky loans so the standards were much higher.
Today loans are typically “bundled” into a Mortgage Backed Security (MBS) and sold on the Market to Investors which changes the Risk dynamic.
The builder gets their money when the house is sold / mortgage is made, likewise the real estate agent, the loan processor, the broker who did the bundling and the broker who sold the MBS to investors, leaving them with all the default risk. Since the risk of default is transferred it’s to everyone’s advantage, except the investor and home buyer, to make mortgages as high as possible and as risky as the market allows.
Back to car loans, the same thing is happening today in both the new and used car markets.
So what happens to Bob or Sally if they’re laid off and still have 4 years of payments on their $60,000 vehicle? Seems like everyone has already forgotten the last Mortgage Meltdown.
The mortgage we had on our current house (paid off now) was with a small Bank (Lowell 5). They didn’t sell their mortgages. Very strict standards for them to write you a loan. But the vast majority of mortgages sold around here are through mortgage brokers.
Our first house loan was with a local S&L that didn’t sell loans. We refinanced with them after a few years when rates dropped. We got the loan for our second house with the credit union at work (NASA Federal Credit Union) and they don’t sell loans either. There were stories pre-2009 that buyers of bundled loans messed with their customers and we wanted to avoid that.
One of our mortgages we had in the 80’s was with Citibank. We hunted for the cheapest fixed loan and found one through a mortgage broker and they sold it to Citibank. Rates were still dropping so we decided to refinance for a lower rate. I called Citibank and the BEST they could do was lower my interest rate by 1.5 points. I turned it down because I could get a loan through a mortgage broker for 3 points less. The whole refinance process took about a week. New mortgage was 3 points less than current mortgage. And that mortgage broker sold the mortgage back to Citibank. If Citibank just offered me a mortgage 3 points lower than what I had they could have saved themselves some money.
That is one bank I won’t deal with after what they pulled in South Dakota. They moved card operations there because there was no interest rate cap. Then they could charge 28% or more. The people there think they are saviors when they just sold out for a few gold coins. Sorry to say, true colors when a little money is involved. I had a seminar with a couple of guys from the New York office and they were a couple of the most arrogant people I’ve met with little concern for costs.
Just me but of the card companies I dislike with a vengence, they are at the bottom.