Sunday, September 28, 2008

Time To Act Like Grownups!

One of the big underlying reasons that our economy has gone south is that, when the housing market was still growing, too many people were allowed to qualify for mortgage loans and purchase homes that they were really in no position to buy in the first place. When the market and the economy started going soft and people were unable to afford their loans, the foreclosures mounted, and the snowball effect took over.

Now, the government is dismantling a program that has homebuilders pitching fits... This program, in essence, allows builders to pay the minimum three-percent downpayment that the homeowners need in order to secure their loans. So, in essence, the homeowners didn't need to have any money invested in their homes. Builders are now pitching a fit because some of them were selling up to a third of their homes this way, and they are afraid they will be left sitting on empty houses. I say GOOD!

America is choking right now because too many people have been given a free ride. Whatever happened to sacrificing and working hard to save up money for a downpayment? When Robin and I bought our first home (back in the day), you needed a minimum of 10 percent down to buy a house, and even then, you had to purchase mortgage insurance to cover you until you had at least 20 percent equity in your home. We scrimped and saved for a couple of years to come up with the cash, but we did it... and so did all of our friends. It was just something that was expected of young couples back then.

The government says people who have these builder-assisted down payment loans have their homes foreclosed at nearly three times the rate of people who put their own money up to buy their homes. There is definitely something to be said for saving your own money and being responsible. If I have 50,000 dollars of my own money invested in a home, it's going to be a hell of a lot harder to walk away from it than if I have no cash tied up in the house.

Taxpayers are about to spend 700 billion dollars to fix the messes that things like builder-assisted loans have created. One of the lessons we should take away from this bailout is that the American dream of owning a home is not an easy dream to achieve - nor should it be.

We'd all be better off if people were willing to drive their cars for a little longer before trading them in, or if they skipped the big vacation every once in a while, or didn't rack up thousands of dollars in credit card debt every Christmas.

The money you'd save would keep the American Dream from becoming America's nightmare.

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