|
Home Loan Programs for
People with Bad or No Credit |
| We are in the midst of a housing crisis
in our country that has already created havoc in the financial world and if
home foreclosures continue at the present rate, the U.S. economy is in
danger of collapse. The number of home foreclosures has nearly reached an
all time high. This has created a "glut" of of homes on the market and has
consequently reduced the value of most other people's homes across the
nation. This situation did not occur overnight. It began with the inception of interest only loans, adjustable rate mortgages, and zero down payments. Offering home loans to people with bad or no credit is not the answer to the problem. To do this would only postpone the inevitable. We must let the system "wash" itself. To relax the loan qualification requirements in order to get the bad loans off the books of the lenders is the same thing that started the problem in the first place. Some people place the blame for this crisis on predatory lenders. Granted, those lenders played a big part, but most of the people who signed their names on the "dotted line" are just as guilty. There are exceptions such as sickness and loss of employment but in a normal economy, attrition will take care of the problem. However, we are no longer experiencing a normal economy. Our country is in for some tough times. We are not only experiencing the housing crisis, we are faced with rising gas prices, the cost war in Iraq, rising unemployment, and the high cost of medical care just to name a few of the critical issues. Can our country survive all of this? I have no doubt in my mind. The American people will always find a way. It is my opinion that a home is a place to live, not an investment that will increase in value to the point that it will provide money for retirement. The only way that a home should increase in value is to make improvements or additions. Any other increase in value is called inflation, and the only ways to benefit from inflation are to move into a lower priced home or to die. I will concede one point. In the case of real estate investors, profit can and should be made from rental. It is disturbing and sad, but I think that there will be a new class of homeless people in our country. Decent people with good jobs who have experienced foreclosure will find it difficult to obtain housing. Obviously, purchasing another home will be out of the question in most cases, unless the person can come up with a significant amount of cash, such as a loan from a relative to purchase a very low priced home. Renting a home or apartment could be difficult because most landlords run a credit check on potential renters, or require a significant deposit. I do not think that the federal government should provide assistance to people who's homes have been foreclosed. That would not be fair to people who's home mortgages are in good standing. I do think that the "Feds" should provide tax incentives to the buyers of foreclosed homes. You will probably say that this only benefits the rich. If they are willing to take the risk, I think they are entitled to a benefit. There is no logical reason that a newly married, young couple who are first time buyers, should purchase a $350,000 new home with an interest only or an adjustable rate mortgage unless they are expecting an inheritance within a short time, or have a significant trust fund that will protect their mortgage. In the past several years, it was possible to purchase a new home (sometimes without a down payment), with an interest only loan, and the monthly payment was less than the cost of renting an apartment. Those days are gone and I hope forever. My Dad told me years ago: "The best boat afloat has got to be paid for". He was concerned when I purchased a new car dealership at the age of 32. I signed an adjustable rate note with my bank for my floor-planning. It worked great for 10 years and then came the Carter administration and 20% interest rates. Fortunately I got out of business without filing for bankruptcy. My Dad was a farmer and did not even have a high school education but he was much smarter than I. In the late 80's and early 90's, Colorado Springs experienced a similar housing crisis. Almost all of the S&L's in our city "went down". I had some funds in World Savings here in Colorado Springs and I was concerned about the security of these funds. I talked with the manager of the branch one day and expressed my concern. She assured me that I had nothing to worry about. When I questioned her further she informed me that World Savings, which was based out of California would not make a home loan for more than 80% of the appraised value. They may not have earned as much as the others during the good times but they survived the bad. My advice to people with bad or no credit is to do whatever it takes to rebuild your credit score. It may take several years but anything is possible with hard work and perseverance. Remember, "Rome wasn't built in a day". |