In 2005, I followed the advice of everyone I knew and ventured out to buy my first piece of the American dream.
I had no money and my only credit was bad. But in the wild, wild west of home buying in the early aughts, I was the perfect home buyer – desperate, dumb and with a pulse.
So after cashing in a portion of my paltry IRA and forking that money over, I initialed the 80-something pages with terms like balloon-payment and ARM (adjustable rate mortgage) without a care. I was going to be a homeowner – so what if the interest rate was going to be 9 percent?
Soon reality came knocking. Two months in came the first mortgage payment. Five months later the first tax bill arrived in the mail, and unfortunately, no one had advised me to set up an escrow account. Then eventually came the homeowners insurance premium.
After wading through the first two years, I thought I had figured this homeownership thing out. Then, all the air went out of the balloon as notice came that my interest rate was soaring to 12 percent, and the house payment was jumping up several hundreds of dollars.
I was officially in sub-prime hell.
Fortunately, my mortgage company (the original lender that gave me the loan before it was sold off four times) was willing to throw a life raft of sorts my way and refinance. Nevermind that they added $12,000 to the original purchase price to make all the numbers work. I was going to have a payment I could afford – for a while.
Life then happened. A divorce and a few questionable financial decisions later, my little piece of America was slipping away.
But I was not alone. Across the nation, many people were in far worse shape as the balloon popped on the sub-prime market. The risky loans given out during the housing boom to underqualified people like myself were backfiring at an alarming rate.
Many people had no option but to walk away. According to RealtyTrac, by the end of 2007, there were more than 2.2 million foreclosure filings. The same group reported another 3.1 million foreclosure filings in 2008.
With the economy suffering as a result and banking institutions hemorrhaging money, the federal government stepped in with the Making Home Affordable Program to provide assistance and help with loan modifications. To avoid the inevitable, I took advantage of the opportunity and received a loan modification that cut my interest rate by more than 6 percent and monthly payment by $500.
Most importantly, I was able to keep my home.
After almost nine years, I sold that home a few weeks ago.
Somewhat smarter after learning from past mistakes, I bought another home. That process is not nearly as simple now as it was in the last decade, when you just filled out a few forms. There are much stricter guidelines, credit requirements and also the mandate to buy mortgage insurance if you’re putting up less than 20 percent as a down payment.
These changes are for the better – both for the banks lending the money and the homeowner.
Owning a home is supposed to be the American dream, not a nightmare.
And after fixing the leaky toilet and broken garbage disposal, I certainly hope it will be – the second time around.
Richard Greene is sports editor of the Messenger.