My biggest financial regret happened in 2007. Like thousands of other Americans, my husband and I were encouraged and then permitted to purchase a house for no money down. We heard comments like “It is the best time to buy!” and “You would be crazy not to take advantage of this market!” So with dreams of pride of ownership, my husband and I, at age 24, made one of the biggest purchases of our lives in early 2007.
At first we had a blast. We got to drive around and look at tons of houses. I began daydreaming about décor and my husband priced lawn mowers. I secretly looked at baby nursery furniture. When we did find a cute, two-story house in a quiet neighborhood, we were thrilled! We had been approved for $500,000 (which I now know was ridiculous for our salaries!), but this house was only $200,000. It was a little smaller than what we wanted and a bit of a drive from work, but it was just a starter house after all. We didn’t have to pay closing costs and we even got $1,000 back for going with the realtor in a specific company. We were applauded by our friends and family.
The plan was to live in the house for about two years, make some improvements, and then resell for a profit. And then we could buy a house that we really wanted. Something with a pool perhaps, and closer to the city. Great plan right? Wrong! Welcome to the housing market crash of 2007. Mere months after we closed, the housing market was turned head over heels. I watched the value of our house rapidly decline over the next two years. Our friends who had waited to buy, were now buying bigger and better located houses for half of what we spent. Our $1,400.00 a month mortgage payment suddenly seemed very steep with the prices of virtually everything inflating.
We began to struggle. Our bank suggested that we might qualify for a “loan modification.” Our payments would be drastically reduced if we were accepted into the program. The only problem was that we needed to be delinquent to qualify. So on “advice” from a nameless representative, we missed a couple of payments. We turned in the paperwork, wrote a sappy, sad letter of explanation of missing payments. We were told we were fine. Then we were served with Notice of Foreclosure papers. During this time though, we were told by our bank that we were still fine. We were “fine” until our house was listed for auction.
Long story short, we ended up hiring a law firm to push through our loan modification. It took over a year to get everything settled. We now have a balloon loan and are not really paying off our house, but our mortgage payment is still cheaper than anywhere we can rent. Our “starter house” is now our “stalled house.” We probably should have foreclosed, but that just doesn’t sit right with me. I wish we had waited. I wish we had been smarter.
Moral of the story? If something seems too good to be true, it most certainly is.