Why are people buying houses they can't afford?

Question

Paying intrest only sounds great to all these people so they can buy new houses for monthly payments fraction of the cost but that only lasts for a limited time and your then going to pay the full monthly payments which then about triples the amt you were paying. This is why so many houses are going into forclosing right now. This is what is causing tons of companies to go under and people to lose their jobs. Stop buying houses you cant afford!

For those of you who blame the banks are wrong...You grow up learning read and understand everything before you sign anything. Its the peoples fault for not understanding....I would think making a class in highschool to teach us about loans and mortgage would be nice but there is alot of books to read to teach you.

Answer 1

I am in total agreement. I am amazed at how many people do not think ahead, they want it all right now, and give no thought to how they will pay for it.

Hopefully those people will loose their homes, go back to renting, and this will never happen again.

I think the whole country now realizes that the sub-prime thing does not work. People have bad credit by choice and will not change their bahaviour even when given a chance to have a home.

Answer 2

People get interest only mortgages, where you actually never pay down the principle and just are paying the interest. They are banking on the fact that in a few years (5, 10 or more) the value of the house will have gone up high enough you can refinance and start actually "buying" your home. Many foreclosures are due to people using this strategy and then the housing market dropping values. They can't refinance because they owe more than the house is now worth and they were dumb enough to take out an adjustable rate mortgage where the interest is going through the roof. If I were in your shoes, I would look for a small house in need of fixing up. Then you can increase the value by remodeling/restoring the house. After a few years sell it, take your equity (difference between what you owe and what it sells for) to use as the down payment on the next, better house. Good luck.

Answer 3

People yes are buying houses, but the problem isnt the people. but the banks, first no body explained what was an arm to regular people and also they were not interested in people knowing how it did really work. Banks to attract more people because they had money and wanted to lend, so more fees etc etc. invente the arm whinch is practic is a fraud, and the government should have done something about it. it works like this, first yr the interest is 4% , and then the bank could increase after 12 months to 5, then to whatever the bank wants, so if you started paying $3,000.
then you will end paying 7, 8, 9,000.00 so for one family is toomuch but nobody knew because savings and loans didnt want yo to know, we allways though it was like variable, that in its life dont increase more thatn 2 1/2 points, was a new version, and now banks and getting back the houses, shame on the banks that are taking the dreams of people and a safe place where to sleep. Also the government should do more, this is USA no a 3rd world country, but they are the rich people and can get away with murder

Answer 4

I agree with you 100% BUT your question is more of a rant. Surely someone who recently had their house foreclosed on will read your question, take offense, and report you. You might want to re-word?
I think if banks wouldn't have been greedy and just didn't pass out creative financing loans like candy, this situation would have never happened. They're more to blame than the inexperienced first time buyer who has stars in their eyes at the thought of bring approved to buy a house they didn't think they could afford. Believe me, lenders can make things seem all rosy when they're not. Sure, each person should investigate before making such a huge investment, but it is really hard to find someone who is on YOUR side and can explain things to you. A lot of people feel they got conned. While they made the mistake of signing something they didn't understand, nobody took the time to tell them otherwise. It's a sad situation and I really feel for the people who got hurt by this. Let this be a big lesson learned - you can't make an investment inthe hundres of thousands of dollars without doing your homework first.

Answer 5

Seeing it from the buyer's eyes, it wasn't so far fetched... You were told by a high pressure broker that you could get approved for a real low rate loan that had your payments way down during the first five years and when it was time to pay the piper with the increased payments in the sixth the typical sales pitch was, "Don't worry, you come back with me and I'll refinance you on a new loan and I won't even charge you for my services" along with "Besides, look at the market, your house will be worth twice as much in six years... hell, you'll probably be able to take money out of it at the refinance" Of course, then reality set in and the housing market corrected for the huge increases in house values from the last few years and voila, no one will refi you and the slick broker that sold you the "creative" loan in the first place is either bankrupt himself or is somewhere far, far away with all the money he was able to scam. You can't blame people for dreaming and being sucked in by a bunch of slick sales people.

Answer 6

I agree with you on this. Too many people are attracted to purchasing houses to fulfill their dreams, but they're purchasing houses that cost more than what they make in a month.

My uncle had an argument with two of his sisters (these sisters have their name on his house), so he decided to move and stop paying mortgage. Someone gave him a good deal on rent for a house three times bigger, so he started renting it. Later, the landlord stopped paying for mortgage and told him that he would either need to move out or take over the mortgage and the house will be his. He's a family of 7 with only one income. Since my uncle has bad credit, he asked his relatives to put their name on the house. No one said yes. I believe this is a good thing, because he'll mess up everyone else's credit if he doesn't pay mortgage. In the past, he couldn't afford to make the payments on his car and it was towed. Later, my aunt lend him the money so they'll have a car to drive his kids to school. I believe he's trying to make himself feel good by living in a big house and driving a mercedes. I wouldn't help him because I know it'll mess up my goals.

Answer 7

Simple. People don't budget.

They go to their realtor or mortgage broker, and ask 'how much house can I afford?' The professional runs their numbers, and gives them an answer.

Of course, that answer is the largest, most profitable answer for the realtor/mortgage agent.

Then, the customer believes them, because it is what they want to hear - that they can afford that $350,000 house.

This is wrongheaded on both ends of course. The buyer should determine how much they can afford BEFORE consulting an agent, and the professional shouldn't sell homes the buyer clearly can't afford. However, both fall into the pit because it means a bigger house for the buyer and a bigger commission for the seller.

This strategy is similar to going to a used car dealer and saying "here is my bank account, what car can you give me".

-->Adam

Answer 8

Because the uninformed do that, and are only concerned with the monthly payment.. The real question is why did the money lenders lend the money to unqualified people?

Answer 9

The same reason people smoke cigarettes when they know it will make them sick and be a burden on society due to increasing health care costs.

Answer 10

You are 100% right, but too many think debt is the american dream.