American Dream Rant.....

[LMTC]

Not to change the subject much but what ever did happen to savings accounts. Both my boy's have savings accounts. My oldest use's his to put in the money that he makes from selling pumpkins. The interest rate on the account is .76%. He has a decent amount of money in the account. We've done a CD but really why put your money in a bank that get's to use it basically for free? Even he complains about the interest and he's 10. Going to be interesting next week. He's going to see the President of the bank to ask him this same question. I gradutated with the President and he told Warren to come see him anytime he had a question. Boy is he in for a surprise!! My son takes his business serious. Got to love kids who aren't afraid to ask questions. Just hope this old geezer can keep up with the answers.
Have a great day!!

Alan--have your son look at a brokerage account; we use Fidelity. That's where my sons' and my wife and I put savings. It can be accessed with a check, and you can set up online access whereby you can transfer the money to or from your checking account instantly. You pick some tax deferred muni bond account as the core, then immediately transfer any deposits to Cash Reserves, which historically pays CD type rates, but without any limitations on access. No fees on the account or checks. Works well for us.

 

[turbo36]

Firstly there is money made through fees to make the loan, then these loans are "bundled" and sold to other financial institutions that specialize in servicing the loan and making money on the spread between the original loan interest rate and the rate of the bonds they sell to the public.

Banks don't make money selling the property if the debtor defaults, there are so many costs associated with repossession that the banks very rarely cover the loan amount when someone defaults. One thing is for certain, the last thing a bank wants to do is own real estate.

It is naive to believe that the banks have any "moral good intention" when they make a mortgage loan it is simply another fee generator, nothing more and nothing less. It all boils down to income, if you have the income to support the payment they will make the loan, that is why some of the refinance specialty companies have been making 125% loan to value ratio loans.

Also, it's very easy to get a start up business loan if you have personal assets to pledge against the loan amount, they really don't care what your business plan is if they know they can go after you personally when your "dream" ends up in failure like 8 out of 10 do within 5 years from start up.

 

[mjarrels]

Life isn't fair... the sooner you accept that, the better off you are.

mark

 

[MossRoad]

Not to change the subject much but what ever did happen to savings accounts. Both my boy's have savings accounts. My oldest use's his to put in the money that he makes from selling pumpkins. The interest rate on the account is .76%. He has a decent amount of money in the account. We've done a CD but really why put your money in a bank that get's to use it basically for free? Even he complains about the interest and he's 10. Going to be interesting next week. He's going to see the President of the bank to ask him this same question. I gradutated with the President and he told Warren to come see him anytime he had a question. Boy is he in for a surprise!! My son takes his business serious. Got to love kids who aren't afraid to ask questions. Just hope this old geezer can keep up with the answers.
Have a great day!!

Good to see your child starting early. The problem with the interest rate on the savings account is the more he puts in, the less it is worth had he spent it at the start of the year VS the end of the year due to the buying power of the money diminishing each year because of inflation. The interest rate has to be greater than the inflation rate in order to have his money work for him. He should look into a no load mutual fund for starters.

 

[DUMBDOG]

Etrade has a savings account that will pay five per cent. Paypal also will pay about the same. Since the banks became less regulated all of the money that they used to pay on savings accounts is now going into new buildings.

 

[BobRip]

I think if the house increases by $40,000 by the time the people save up $10,000, then this house is way too expensive for them. They need to look for a cheaper home. Everyone may want to live in a McMansion, but not everyone is financially able to. Better to have a secure future in a modest home than to live on the brink of disaster in a McMansion trying to keep up with the Joneses.

I agree in general with you, but my daughter lives in Maryland and the cheapest condo is around $400,000, hardly a McMansion. To go up $40,000 is only 10%. That can easily happen in a year or less. I don't like this, but after being unemployed for 2.5 years out of college (electrical engineering degree) she took a job where she could get it. Most young people up there live at home until they save enough for a house or condo. I expect that other people have even more of a struggle than she does. Life is not as simple as it used to be. By the way, she does save a lot, but will she be able to afford a place? I don't know how at this point.

 

[MossRoad]

She needs to get out of there and go somewhere where housing is affordable, or jobs are available. I know it is a lot tougher now than 20 years ago. I don't see how a young couple could start out and get into a new house right off the bat like my folks did in the late 40's.

 

[cp1969]

I have to agree with MossRoad...if she wanted to move to the Midwest, jobs are available for EE's and housing isn't too expensive, either.

Have her look on the Garmin website.

 

[hazmat]

She needs to get out of there and go somewhere where housing is affordable, or jobs are available. I know it is a lot tougher now than 20 years ago. I don't see how a young couple could start out and get into a new house right off the bat like my folks did in the late 40's.

It is happening. My employer is often loosing young engineers once they start looking to buy a house/condo. Reading through this thread, I don't think y'all living in the midwest really have an appreciation for how expensive it is on the coasts. It is kind of abstract until you experience it. There is a huge disconnect between the folks in my area who are retiring now - they could afford 15 year mortgages on a single starting salary and my generation who are struggling to pay a 30 year mortgage on 2 salaries. Unfortunately, they've stopped building modest sized houses, the land is so expensive that it isn't viable to only put a 2,000 sq foot house on it, better to build a 3,500-4,000+ house with three car garage & "bonus room" which continues to price younger folks out of the market.

A quick check on realtor.com showed that in Evansville, Indiana there are no less than 50 houses for $20,000 or less! Not sure how a nice a neighborhood they are in ... The Cheapest was listed for $5,000 (less than my annual property tax bill). I could have bought half the group (25) for what I paid for my house (granted my house is 4 br vs. 1 or 2). I sometimes think about buying a 12 pack of houses and becoming a slum-lord in Evansville, If you could get $200-$400 a month rent, you'd be making 20% ROI. The gotcha is that the local economy isn't strong & these places are so cheap because they are vacant.

In Lawrence, MA (a small city near me, not known for expensive real estate - not a first choice for a young family to settle down) the cheapest listing was $49,000 for a 500 sq foot condo. There were only 5 listings for less than $100K. In my town (probably about a 7 out of 10 for most expensive in Mass) a buildable lot (2 acres) goes for >$300K. The so called McMansions in Mass are more than a $1M, often approaching $2M

My (very limited) opinion is that the areas that have dirt cheap housing is that if they have a "technology" company - they are often a one horse town - if that employer goes out of business, the local economy will collapse.

Of course there are better income/housing cost areas than the north east - my brother lives in Columbus, OH, he paid 40% what I did for a similar sized 4 br house. He has a 10 years left on his 15 year mortgage... (he makes a similar salary, his wife doesn't work)

Back to the subject at hand - the folks signing the papers have responsibility to understand what they are getting themselves into (especially these "creative financing" schemes".

I was originally going to sell my 2 family rental property as 2 condominiums. I had an offer on one - $300K. The buyer couldn't come up with 5% ($15K) to qualify for the standard first time buyer programs... How are you going to afford a $1,800 a month mortage ($2,200 w/ taxes & insurance) if you can't save $15K to start? I'm currently renting the unit for $1,300... They could easily rent at that rate - $2,200-1,300 = $900 - in 16 months they'd have saved the $15K. I think the buyer had just gotten a new job & figured they could get 100% financing - no waiting - that's the "new" american way...

 

[shvl73]

I think MossRoad has nailed it twice. Plan your finances then plan the family. If it doesn't work for you in your area, look for a place where it does.
I have relatives who have planned and ones that haven't. The ones who planned seem to enjoy themselves a little more. The ones who didn't keep saying, "It's just not fair, we can't afford to buy a house" .
At one point earlier in life, I was working for my parents Mon-Sat, waiting tables 3 nites and Sun, and briefly tended bar at at another place.
Just last night, Nancy and I were discussing this very topic and we both realize that we are fortunate to live as we do.
The opportunities are there for most people, if they try.