Follow the Leader: Smart Move
As I write this I sit in my cramped, expensive two-bedroom apartment in Astoria, an apartment that I share with my fiancé. One bedroom is only big enough for a tiny desk and a few bookshelves, and we have no dining room or wall between the living room and the kitchen. Nothing would make us happier than to own our own home, but to do so will demand significant sacrifice.
For starters, I may have to move into my parents basement when our lease expires. Thats not because Im a 30-year-old loser with no hope for improvement, but because the rents in New York City have risen so high that I could never save enough to make a down payment. When we do eventually purchase the first house weve all but committed to buying upstate, it will mean making a long commute back to the city to work. That distance, and the lower prices that come with it, might be all that makes home ownership an achievable dream.
You could afford a mortgage.
This was a common refrain I would hear when someone would ask how much rent I was paying over the last few years. With interest rates so low, it made perfect sense to look into buying a home, rather than remain a perpetual renter. But without anything saved for a down payment, despite my good credit, my research showed that I would likely be forced to take an adjustable rate mortgage (ARM). After two years of fixed-rate bliss, my monthly payment would have been subject to the whims of the index. That meant my monthly payment could have risen to an unmanageable level. Since I have no desire to destroy my finances and live in perpetual debt, I passed. Personal responsibility meant home ownership would have to wait.
Why should I feel sorry for someone who didnt think things through and jumped too early at the first loan they could get? Why should I have any sympathy for people who couldnt grasp the concept that their adjustable rate mortgage might adjust upward? Tens of thousands of my fellow Americans neglected to follow my example and consider the potential disaster that an ARM could wreak on their lives. And now that their payments have grown so large that they can no longer afford to make them, theyre not accepting the consequences of their poor decision-making. Instead, theyre asking the government to bail them out. And both Republicans and Democrats are happy to oblige.
President George W. Bush has proposed several measures designed to help the up to two million Americans facing foreclosure to stay in their homes, such as allowing the Federal Housing Administration to guarantee refinanced loans, an unusual step for the agency. Democrats have chastised Bush for not going far enough. Senator and Presidential candidate Hillary Clinton has called for a $1 billion federal fund to help homeowners avoid foreclosure. When she announced her plans, she stood beside a New Hampshire couple who saw their monthly mortgage payment balloon from $2,400 to $6,000 under the terms of their ARM. Another candidate, New Mexico Governor Bill Richardson, argues that Bushs plan is flawed because it does not include financial assistance to put families into rentals or transitional housing after they have gone through foreclosure. These families should not be forgotten or cast out of their homes without any place to go, said Richardson.
Logic would dictate that those who can afford a $2,400 rental could also have afforded a $2,400 mortgage. They shouldnt need anyones help finding new housing. Instead, politicians are focused on holding everybodys hand through their financial crisis, as if the borrower is not to blame whatsoever for defaulting on their mortgage. Sure, some homeowners were sucked in by predatory lenders and deserve our help. But many, many others either hoped to flip their home quickly and cash in on the then-booming housing market or simply bought more home than they could afford in the first place. Greediness and financial stupidity should not be rewarded with a federal subsidy.
The only people who appear to feel this need for sympathy are pandering politicians and those who face foreclosure themselves. A recent Fox News poll found 70 percent of respondents opposed to any federal bailout. A Housing Predictor poll found the opposition to be 81 percent. Millions of responsible people have credit card, student loan and dozens of other debts, including mortgages, and these polls likely indicate the level of their resentment at the bailout idea. But it doesnt take a poll to know this. Ask anyone you know about the idea of a housing bailout. More often than not, their reaction is one of disgust. Nobody likes to reward people for bad behavior.