Why the market crashed in 2008 Pt: III
Don’t miss the train headed towards the promise land! The land of riches and financial security. In the previous blogs I discussed two factors of why the housing market crashed, predatory lending and subprime mortgages. The finger pointing towards banks, loan companies and corporations only goes so far, individuals who took out mortgage loans knowing they could not afford it are as much to blame. Therefore, there is not one subject to blame but a combination of events and individuals that led to the great recession.
Have you ever heard of a N.I.N.J.A. Loan? That’s No Income No Job/Assets. I have known individuals apply for mortgage loans to purchase a house and they didn’t even have a job! I asked why are you putting yourself in this position, how are you able to afford this home without any income. They told me the housing market is going up and you can’t miss the opportunity to make money, what I will do is ride this bubble for the next year or two sell the home and cash out. A $400K home in a year or two will be around $474K – $500K by the way things are going. So, the plans was every month or so get their home appraised (of course the appraised came in at over the value) and because the home appraised higher, use that equity to pay the mortgage. There was no source of income and they were using equity as leverage to may the monthly payments….very risky. This is just one example of individuals trying to take advantage of the housing bubble, watch the movie “The big short” The scene where the female says she had 5 homes and a condo says it all (she had homes under her pet’s name).
When you are ready to make the biggest purchase of your life make sure you are doing it because it’s the home that you love and not to become rich. The saying goes “a house is made of walls and beams….a home is made of love and dreams”. If you have this mindset it doesn’t matter if the housing market fluctuates in either direction the fact that you live in a place you call home is all that really matters.
