The American Housing MESS! Part 1

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If someone had told me years ago that America would be in a housing crisis I would have probably laughed at them. Probably took them out to the shed for an old fashion but whopping, or have them committed to the nearest mental institute for pshychiatric check ups. Nevertheless, its here, a Housing MESS! But ever wondered how did we get to this point? Were there giant red flags at the onset of this?Who is responsible? Government? Lending Agencies? Consumers? Who? I want to just discuss one area and suggest a few things for the housing market to rebound. Though it may be a drop of water in the Grand Canyonic black hole of this mess thats sucking the life blood out of every dime we make, there is hope. Aside from all the conundrum, with my wife and I, there is a popular channel on TV, HGTV, with where it seems it has iconic shows like "House Hunters", "Property Virgins" and others of the like, something ominously dawned on me; almost every house, apartment, condo, that was bought, the buyers seem to have the option of NO MONEY DOWN!! WHAT THE HELL! This "NO MONEY DOWN" mantra is just one small but giant reason as to the cause of the housing crisis, why? Lets think for a moment; mortgage lenders know that the more money down you the consumer puts into to the pot, that makes the principle less, which makes the interest payed back less, which makes their job essentially harder especailly if you looking at a fixed rate. Lets demonstrate, not saying these are actual figures just a demo:Say I want a 30 year mortgage at a fixed rate of 5.55% for the principle amount of 250,000 dollars. That would put your monthly payment at around 1400-1500 dollars or more based on conditons of age and what not, BUT what we dont realize is this..... if we dont put no money down, with amortization in play most of that monthly payment is going to interest in the first 3-5 years, maybe even more, then after 5 years or so if you can no longer afford it, the lenders have reaped a good chunk in interest so now they have no problem foreclosing, and most likely they will and sell the property over which has now increased in value, and probably start the process all over again with some other un be known...sad! So you get into this mortgage, after a few years cant afford it, the lenders have their chunk of interest, they foreclose and re-sell and you loose both ways, and they win, dont forget they've also factored in insurance for them not you. But here's the catch...if you had waited and saved about $10,000 to put down and saved an additional 7500 to at least settle you for the next five months of payments, then the house migh not have been lost,and you would have positioned yourself to survive the mortgage, here's why? $10,000 down reduces your principle, which interns reduces the ratio of interest amortization yanks out of your monthly payment. I garauntee you if you come into mortgage negotiations with cash, these lenders will look to negotiate a higher interest rate, which is at least regulated thank goodness. Also the longer you can see this process through to the end, the better it is for you. But no money down sounds so enticing huh?Yes it does. Ok tips:Try to ALWAYS PAY MONEY DOWN TO REDUCE YOUR PRINCIPLE!!!This is not rocket science, government should make it a regulatory stipulation that money must be paid down on the principle, at least 1% of it. Then People need to be responsible, try to atleast save 5-6 months of the average Monthly mortgage payment, and while you have a breather those months save another three months in advance but when the six months expire, pay only two months then alternate saving a month in advance then two months in advacne and vice versa. What this does is not allow your finances to be squeezed, and make sure saved these amounts on Fixed CDs where you can gain and please DONT TOUCH IT UNLESS THERE IS AN EXTREME EMERGENCY!!! Medical and and other emergencies qualifies for this. Also try to cut down on the years in additon to this. These are just simple way to cushion the blow of a mortgage mess that has spiraled now even worse. Sure it takes discipline, and conduct and sacrifice, but its one to make when tacked up against loosing your home and the money you've already invested in it. I'll take on the role of the Government and Congress in detail in Part 2. Hope this info was helpfull.