Foreclosure is based on two key components: ignorance and greed. Lack of education, living beyond our means, and sheer greed for more money are rampant problems in our country. We have seen it throughout history in war, our churches, our education system, our entertainment industry, our commodities and stock market, and now our real estate. Since I am an investment property owner and have a sibling who lost everything, including his home to foreclosure, this crisis is a personal matter. My solution involves looking into what drives both lenders and buyers into making lending mistakes that lead to borrowing catastrophes.
Working in health care with patients who have physically injuries, I noticed their injury can’t help but affect their overall mental state. Having a serious injury means hours of physical therapy, which many people despise because they have to make extra time for it weekly, and patience which many people lack. Unfortunately, it is not until someone loses their health that one pays attention to their own health care. A similar situation exists with the foreclosure crisis plaguing our country. It is like having a major injury and being forced to go to physical therapy.
The injury starts with an individual looking to buy a home beyond their means. People in our country want more or what they don’t have: bigger cars, finer homes, et.al. Real Estate is an excellent commitment when it is thought out, and one has time to budget within/below their means. As a second lieutenant in the Unites States Marine Corp, I could only afford to buy a home whose total package (taxes, principle, insurance included) was less than 1.5k per month. I only made 4k per month, so a mortgage, renting an apartment (400$ a month), gas, food, and entertainment all had to add up to 4k. Plus I had to calculate how much money to put aside to invest in my Roth IRA every year. After calculating all of this, I knew my investment was within my means. My problem was in the fact I did not think into the future of how I would pay the mortgage if my rental home was not occupied, or if I did not have a job. Thankfully I found alternative payment options when the later situation became reality.
Because the greed of our country starts with wanting to live beyond our means, buyers need to consider their fall back plan. What if they lose their job, have to move, run into family problems? Then what happens to their home? Can the borrower afford their other fixed expenses, plus their mortgage, and have some extra money to spare for travel or vacation with their family. People in our country have gotten used to living from month to month to pay off their debts with little left over to enjoy life.
To solve this issue, it should be required that first time home buyers attend a weekend seminar on how to budget, how to plan for the future, payment options, fallbacks, and learn what exactly goes into a mortgage. Because investing in a home...