If you read any financial website or newspaper they are constantly mentioning the real estate market and how it is still down in the dumps while home foreclosures are up.
I can remember five to six years ago when the housing market was booming and everyone and their mother were buying new homes. Some were for permanent residence and some were for vacation but it didn’t matter if people were able to afford them or not because lenders were offering interest only mortgages which allowed almost anyone to buy a million dollar home with no money down and a low monthly payment. Funny thing is these people buying million dollar homes using an interest only loan knew they couldn’t afford it under a normal 30 year fixed mortgage but that didn’t stop people because they got sucked in with a low monthly payment. What these people didn’t think about was what would happen in five or ten years once their interest only loan resets and then they need to get a new fixed rate mortgage. In most cases home owners were forced to default on their mortgage and the housing market took a dump. People with interest only mortgages were never able to build any equity in their homes causing them to be upside down meaning they owed more then the house was worth.Â
What is sad here is most lenders knew what they were doing was wrong but they continued to lend to people who couldn’t afford it because they were making money for themselves and their company. Now for the last couple of years our housing market has been in the toilet big time now making it almost impossible for people to get a tradition 30 year fixed mortgage. To this day the housing market as well as the people who got mixed up in this fad are now trying to recover and get back onto their feet. I have a few friends that got mixed up in this and are still trying to get out of the bad situation that this caused.
Hopefully people learned from this situation and this will never happen again.
