2024-07-05 01:10:10
There are some obvious and urgent needs: More housing is needed. It is also important that housing must be affordable.
It is also emphasized that it is necessary to stop giving the opportunity to Wall Street companies to become landlords just so that tenants do not have the opportunity to accumulate equity capital.
Politicians have no shortage of housing affordability puzzles to solve.
The last thing the American market needs right now is another shady financial product that forces low-income Americans to accept bankruptcies and buy real estate they can’t afford.
Two weeks ago, one of the largest mortgage lenders in the US released a “new” program that allows first-time home buyers to secure their purchase with no down payment.
Sounds too good
However, at least for those who know a little about the economy, it is clear that this method is the most direct way to 2008. financial crisis-level economic catastrophe.
So how does it work?
For those looking to buy a home but don’t have enough savings for a down payment, US-based United Wholesale Mortgage offers a way to avoid a down payment.
Instead, 3 percent is borrowed. the value of the house (up to 15 thousand US dollars) as an interest-free loan, and the remaining 97 percent. payable as a standard mortgage.
But here is the “catch”: although those 15 thousand The US dollars will not accrue interest, but will have to be repaid – in full at once – when the buyer sells the home, pays off the mortgage or refinances.
It’s great if nothing bad happens to the buyer’s financial situation or the economy, and your home’s value continues to rise, which is what trends over the last few years might suggest.
However, the reality is somewhat different.
Here are some ways that this 15 thousand. the sword of Damocles, which costs dollars, can end up stabbing the buyer in the back.
Housing market prices, as you can remember from the movie “The Big Short”, do not always rise. And since the person didn’t pay the down payment, if the market situation worsens, they will immediately end up owing more than their house is worth.
If a person loses their job or gets into financial difficulties, they can try to sell their house, which would put them on the hook – they have to pay back 15,000. dollars. But if the house isn’t worth what the person owes, they’re considered the defaulting party.
“That scenario is exactly what happened during the subprime crisis,” said Patricia McCoy, a professor at Boston College Law School. “It’s happened before and it can happen again.”
Even in the best economic scenario, that 15K will still need to be paid at some point. dollars.
As any homeowner will attest, a home that is purchased will be a permanent financial “loss” from the moment one receives the keys to it.
The house will have to undergo many renovations over a long period of time, some of which will require large investments, such as roof renovation. Such investments will greatly limit the ability to save and accumulate money.
United Wholesale Mortgage dismisses all these concerns, noting that borrowers still have to meet strict risk-taking guidelines and that lending standards have risen significantly since the start of the financial crisis.
It’s true – people don’t trust “NINJA loans – no income, no job or assets” loans anymore.
But companies still need to stress that lower-income people who don’t have savings will be hit harder by a downturn in the economy.
“One of the secondary lessons of the mortgage crisis was that by making the borrowing process easier, you don’t do the borrower any good,” said Jonathan Adams, an associate professor at St. Joseph’s University.
“Creative” home buying
The resurgence of zero-debt underlines how sticky 2024 is. became the housing market.
With low interest rates on reserves and mortgages, about 7 percent. sellers are not motivated to sell, and buyers have nothing to choose from, so some of them are forced out of the situation.
One way to get a lower mortgage rate is to buy it from someone else. “Assuming” mortgages allow the home buyer to take over the seller’s existing loan – at (ideally) a lower interest rate.
How it works: The buyer pays the amount the seller has already paid in cash, while assuming the remaining mortgage balance.
Of course, this is not a perfect solution for everyone – the seller’s buyout can be high and the buyer can’t bite.
Only about a quarter of U.S. mortgages are “assumed.”
But it’s better than waiting for a magical combination of macroeconomic forces to finally lower new mortgage rates.
That’s what happened to Ellen Harper, 50, a software analyst who bought a Fairburn, Georgia home in April with 2.49 percent down. reaching an interest rate, while the average 30-year rate was slightly more than 7 percent. It saved her thousands of dollars.
“I just decided I wanted to see the lowest I could pay for the interest rate,” Harper says. “I looked for the best deal I could get, and I think I did pretty well.”
Parengta pagal CNN Business.
2024-07-05 01:10:10