Should I stay or should I go now? This is a national dilemma facing many Americans today. The facts are plain and simple, many Americans took cash out of their home via a home refinance and often times financed themselves into loans with low start rates or teaser payments. Now here in lies the issue, keep in mind this is a generalization based upon my own opinions and experiences and I understand this doesn’t apply to all.
The facts; many people took cash out, borrowed more than they can afford, took teaser rates, or applied using some form of a stated income loan which would often over inflate the borrowers actual income through the home refinance or home purchase process. Now many of these individuals, who took cash out, financed there home with 100% financing, took teaser rates (5% or less), are faced with a national dilemma. With house pricing plummeting and payments increasing many people are choosing to walk away from their homes and just take a foreclosure; as they can’t afford the payments, or realize that it will take the market so long to catch back up to where it was when they bought it that they would be better off bailing ship.
I don’t have the right or wrong answer here but I do know that in the old days, let’s say the 80’s and prior, most people bought a house as a place to live and somewhere to stay and raise a family. Now I understand that is a very Walton’s way of thinking but it’s the truth and we all know it. Then came the mid 90’s and homes began to rise in value a little quicker than the national average of about 7% a year. Home mortgage refinancing practices began to recover from the savings and loan crisis and a new way of thinking was born in the lending world. Do you have a pulse? Do you have a credit score? Well then you clearly must be able to pay for a house. At that point in time(the mid 90’s) housing prices were lower, so from a relativity stand incomes could in theory support the median home price; so I guess stated income and teaser loans then MIGHT have been okay. But the Achilles heel comes into play, houses begin to appreciate and I mean fast and many Americans begin buying expensive toys and spending money they don’t really have. To finance these toys folks would take cash out via a home refinance or debt consolidation loan and here the cycle truly began; my home as an ATM.
Fast forward about 10 years to 2008 when we are all faced with the dilemma, should I stay or should I go? If I walk from my home I can buy another house in two years(in theory) based on current new home loan standards, which if property values keep going down I can buy another house or maybe even buy back my existing house at half the price I used to owe on it before I walked. This is all true you can walk, you could buy your home for less, but do you really want to? You knew what you were doing when you signed on the dotted line, what has changed since then; other then heightened media coverage on the housing market failures which is feeding consumers brains and giving them the food for thought on how to walk away. Again, you knew what you were doing when you took the cash out home refinance, you knew what you were doing when you bought the home, don’t bring everybody else down even further as somewhere along the line we must stop this madness.
Everyone always talks about being a leader and I wish that someone reading this article would become the leader and take a stand in their community. Stand like Custard did at the Battle of Big Horn, take a stand to save your house and do what is right, or we face the possibility of falling into a depression, and don’t think for one minute that the thought is impossible.
