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pipoman

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Member since: Thu Sep 8, 2005, 08:18 AM
Number of posts: 16,038

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I've been in LA, It doesn't cost $500k to live within 30 miles

Of any major city in the US. This is the actual "privilege" that exists...I know people who will swear they need to buy new cars, a bedroom for each of their sub 5 year old kids, eat out 3 times a week and splurge on Saturday for some place nice, move into a turnkey home, it is lunacy that banking regs used to keep from happening.

I had a real estate license in 1985 and sold homes for several years. To qualify for a first time mortgage one had to have 20% down, the 20% had to be earned income or in your bank account for at least a year. Your total indebtedness couldn't exceed 35% including the mortgage.Minimum 2 years job time. People had to save and pay down their debt. Their debt/income may support a $1000 payment which a allow $100k mortgage, but if they couldn't come up with $20 plus 10k closing costs (which could be borrowed but not through collateralization of the real estate) you would buy a $50k home. ..paint the bedrooms, put on a new faucet and toilet, refinish the kitchen cabinets, tidy up the lawn, plant some trees, clean out the gutters, get the ac charged, paint the trim, recalk the windows, and sell it in 5 years for $85k leaving you with $45k equity to buy the $100k fixer upper (2nd home) for another 5 years and scoop the equity allowing for the dream house. It took work. It is what kept the housing market safe for everyone's investment.

Before the bust we had first timers 2 months out of RN school buying 'the home we've always dreamed of' consuming 50% of their income for the interest only for 5 years, 40 year mortgage putting no money down and financing 120% of the purchase price so they can swing by IKEA and furnish the entire new house. Then they pulled up in their driveway in their 2 year leased BMW. ...oh they were so proud. ...now they are the Cabreas'...

both parties shared this one...the other piece is the repubs reducing bank solvency requirements exacerbating the problem.
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