Update: Trying to avoid foreclosure by working with the bank on a quick sale #132 - Page 9

[JesseMomme]

Originally Posted by newbymom05

You can read anything into anything w/ these online posts. As a SAHM, should I be offended because you are implying that I have a higher stress level, have no interaction w/ adults and my competence and skills are unrecognized? Of course not, I choose to believe that's not your meaning or intent, so why read so much into Mothra's post?

:

Originally Posted by jennica

And also the knowledge that things are just going to keep getting worse, more expensive, and we wont be able to make it much longer no matter what we try to do with the situation.
.

Good luck FWIW, I'm not a homeowner, but I have been following the news on the subprime bust for some time, and I found this thread pretty informative over all. I'm sorry you're dealing with this.

[Oh the Irony]

Originally Posted by jennica

I


I can see everyones point, we should have counted the costs better. But, and here is where everyone will say I feel entitled or we are idiots or whatever, but we couldn't count costs that were not there! Gas prices have doubled, property taxes have doubled, our heating bills have almost doubled, our grocery bill has almost doubled (partially because we have a kid now of course), and our health insurance premiums have risen along with most of our other utilities. Yeah, we should have had some wiggle room, but we thought we did.

i don't think you are an idiot at all. or entitled. the above is very compelling.

[Leta]

Originally Posted by shayinme

I don't know but in some ways the fact that your financial life was based on being a 1 income family seems like a plus in that now that you are facing a crisis, you can work and bring in some additional money that is needed until such time that things turn around. (there was a book written a while ago that talked about this, cannot remember the title)

Shay

The book is called The Two Income Trap by Elizabeth Warren. It is brilliant. It is one of the reasons we moved here, to the U.P., and more specifically, to Ishpeming. Our house cost $31,000 in 2005. Do we run a risk here? Sure. But DH and I are both okay with living here forever.

(Yes, our house needs to remodeled, but it is in good shape- new roof, new furnace, really nice intact 70 year old cedar shake siding. It needs new windows, a new kitchen, a new bath, the hardwood floors refinished, and to have the interior painted. We are also going to put on a small addition with a mudroom an upstairs laundry area, and a second bath. So we will put at least another $30,000 in- my dad is a builder and DH and I are both handy, so we'll have sweat equity, too- but we'll hopefully end up with a nice 1800 sq ft house in a wonderful little town for about $70,000.)

The problem with the whole housing industry is that people expect to move fairly frequently. Once you look at your house less as an investment and more as a place you'll live for the rest of your life, the picture really changes. Sustainable energy systems suddenly seem frugal, even if they have a 30 year payback time. You worry less about first cost, and more about whether or not you'll EVER be able to live free and clear- in the aggregate, and month to month.

You also become less willing to commute- at least, I think most people do. The whole idea that you'll have to make a long drive, twice a day, five days a week, for 30 or 40 years, becomes an even bigger bummer, and people decide to live where they work or work where they live.

I grew up in a place- the Irish Hills- that is similar to how Jennica has described her area. In the 60's, it was totally rural- farms and tiny towns. In the 70's, some lakes were built among the dozens already in the tri-county area, and the real estate offices for the lakes were an hour or more away- in Ann Arbor and Detroit. Suddenly, it wasn't just farmers and summer people from Toledo any more. Fueled by white flight and the highways, an agricultural and tourist community quickly became a really far flung outlying suburb. I can't tell you how many kids I went to school with whose parents commuted 80 miles one way to Dearborn every day.

By the time I started school in the early 80's, the consolidated school districts had no room, and taxes nearly quadrupled in less than 10 years. The lake that I grew up near had a population of 10,000 people when we moved two years ago, but there were no sidewalks anywhere, no sewer systems, and you had drive 15 minutes to buy a gallon of milk or mail a letter, 30 minutes to get to a hospital, a decent sized grocery store, or a job making $2 or $3 more than minimum wage. To work somewhere that paid enough to sustain a real middle class lifestyle, 45 minutes was the bare minimum commute.

It sucks. It's a dysfunctional lifestyle. It does not benefit the community itself at all. Once people get that, not only do they not want to live in that house forever, they don't want to live there for another month. For a lot of people in the Irish Hills, gas prices have forced the issue, and they can no longer afford to live there, whether they want to or not.

Now that gas has gone up, everybody wants the hell out of there, and houses that sold for $1 million dollars (I am not kidding) three or four years ago are listed for about $350,000 and they aren't moving. My aunt told me that my grandparents old house (that they sold in the 90s, thank goodness) has been on the market for 18 months, and the price is below what my grandparents sold it for 10 years ago.

My point here is that for 25 years, the Irish Hills were a sure thing, a great investment. Everybody made money hand over fist. It was solid market. And now... one in three homes is in foreclosure. Society is changing in a fundamental way. I think we are at the beginning of a shift at least as significant as second wave feminism. Individuals cannot control such a big movement.

[Leta]

Originally Posted by normajean

Whether or not the banks lied, were misleading, weren't regulated or whatever other excuse you want to make, there is a responsibility to do your homework and calculate what you can afford. This is the responsibility of the home buyer, not the lender or anyone else looking to profit from the purchase of the home.

Regardless of what any salesperson or advertiser or loan officer wants you to believe about what you can afford or what you deserve, the bottom line is sometimes you can't afford it.

Wow. I call BS on this whole line of flimsy reasoning. If the banks are not following their own historic guidelines, and are bending all the rules, where was anyone supposed to get quality information?

You can ask a whole bunch of ousted CEOs, and they will tell you that it is absolutely the responsibilty of the lender to determine what the borrower can afford. If it was not, no one would ever lend money to anyone, for any reason, because people would default all.the.time.

[choli]

Originally Posted by jennybear

Finally, Jennica, I wanted to respond to your "oh it must be so great to have so many opportunities" comment. My husband and I are an example of a hard working, professional couple that despite advanced degrees cannot afford a home in our high cost of living area. That means we don't buy a home. I could bemoan our circumstances, but at the end of the day we don't "deserve" a house until we've saved and have the income to support it. It's a bummer sometimes, sure, but waiting and renting is the responsible thing to do. Your post makes it seem like you feel almost entitled to home ownership and I don't think that's fair.

Your post makes it sound like you think that if a "hard working professional couple with advanced degrees" can't buy a house, no one else should.

Guess I'd better put my condo on the market, I'm not highly enough educated to "deserve" it.

[beachmouse]

Originally Posted by Leta

My personal responsibility is of high importance to me, but (and here's why my argument becomes admittedly philosophical in nature) I would submit to you that the whole entire reason we have institutions, figures of authority, and government is to help pick up some the slack wherein personal responsibility ends. Because honestly, how far do we take it? Do I just take all the blame if my house burns to the ground because I didn't have the foresight to buy myself a fire engine?

I spent a couple of years living beyond the beyond in rural America. The local fire department was volunteer-run, and volunteer subscription. If you made the financial choice to not pay something like $200-$300 to the fire department that year, they would indeed refuse to respond to a call at your house, and let your home burn down, and the worse damage to your home because of no response would indeed be your fault.

[Yooper]

Originally Posted by Leta

The book is called The Two Income Trap by Elizabeth Warren. It is brilliant. It is one of the reasons we moved here, to the U.P., and more specifically, to Ishpeming. Our house cost $31,000 in 2005. Do we run a risk here? Sure. But DH and I are both okay with living here forever.

(Yes, our house needs to remodeled, but it is in good shape- new roof, new furnace, really nice intact 70 year old cedar shake siding. It needs new windows, a new kitchen, a new bath, the hardwood floors refinished, and to have the interior painted. We are also going to put on a small addition with a mudroom an upstairs laundry area, and a second bath. So we will put at least another $30,000 in- my dad is a builder and DH and I are both handy, so we'll have sweat equity, too- but we'll hopefully end up with a nice 1800 sq ft house in a wonderful little town for about $70,000.)

The problem with the whole housing industry is that people expect to move fairly frequently. Once you look at your house less as an investment and more as a place you'll live for the rest of your life, the picture really changes. Sustainable energy systems suddenly seem frugal, even if they have a 30 year payback time. You worry less about first cost, and more about whether or not you'll EVER be able to live free and clear- in the aggregate, and month to month.

You also become less willing to commute- at least, I think most people do. The whole idea that you'll have to make a long drive, twice a day, five days a week, for 30 or 40 years, becomes an even bigger bummer, and people decide to live where they work or work where they live.

I grew up in a place- the Irish Hills- that is similar to how Jennica has described her area. In the 60's, it was totally rural- farms and tiny towns. In the 70's, some lakes were built among the dozens already in the tri-county area, and the real estate offices for the lakes were an hour or more away- in Ann Arbor and Detroit. Suddenly, it wasn't just farmers and summer people from Toledo any more. Fueled by white flight and the highways, an agricultural and tourist community quickly became a really far flung outlying suburb. I can't tell you how many kids I went to school with whose parents commuted 80 miles one way to Dearborn every day.

By the time I started school in the early 80's, the consolidated school districts had no room, and taxes nearly quadrupled in less than 10 years. The lake that I grew up near had a population of 10,000 people when we moved two years ago, but there were no sidewalks anywhere, no sewer systems, and you had drive 15 minutes to buy a gallon of milk or mail a letter, 30 minutes to get to a hospital, a decent sized grocery store, or a job making $2 or $3 more than minimum wage. To work somewhere that paid enough to sustain a real middle class lifestyle, 45 minutes was the bare minimum commute.

It sucks. It's a dysfunctional lifestyle. It does not benefit the community itself at all. Once people get that, not only do they not want to live in that house forever, they don't want to live there for another month. For a lot of people in the Irish Hills, gas prices have forced the issue, and they can no longer afford to live there, whether they want to or not.

Now that gas has gone up, everybody wants the hell out of there, and houses that sold for $1 million dollars (I am not kidding) three or four years ago are listed for about $350,000 and they aren't moving. My aunt told me that my grandparents old house (that they sold in the 90s, thank goodness) has been on the market for 18 months, and the price is below what my grandparents sold it for 10 years ago.

My point here is that for 25 years, the Irish Hills were a sure thing, a great investment. Everybody made money hand over fist. It was solid market. And now... one in three homes is in foreclosure. Society is changing in a fundamental way. I think we are at the beginning of a shift at least as significant as second wave feminism. Individuals cannot control such a big movement.

Are you me? Seriously?

I grew up in the Ann Arbor area and after messing around with lots of income and still not being able to buy a house, we fled to the UP. And I guess I should not say "could not" buy a house. We were approved for plenty. But I was not comfortable taking on that kind of debt. Now we have our "forever house" for a fraction of what we could get anywhere else, are "irritated" by dh's 5 minute commute, and have figured out how to cobble together a very good life with both of us working part time (and thus being able to both participate in dd's homeschooling education). I cannot image trying to survive in the rat race that my parents did. My mom also lives in a development where she could have sold her house for DOUBLE what it is now worth if she had just gotten it together 2 years ago Now she is flipped on her house and is stuck there indefinitely.

[normajean]

Originally Posted by Leta

Wow. I call BS on this whole line of flimsy reasoning. If the banks are not following their own historic guidelines, and are bending all the rules, where was anyone supposed to get quality information?

Um, let's see, maybe "historic guidelines" would be a good place to start, analyzing your own budget, income, expenditures, talking to independent financial advisors who aren't trying to sell you a loan, reading books on homebuying, analyzing the market and predicted trends etc etc etc just like you would do with ANY major purchase. I'm not going to ask a used car salesman's opinion of whether or not the car I want is great, he's going to tell me it is fabulous in every way because he wants to make the sale. "I know the internet says it gets 15 mpg, but honestly if you drive this baby right, I bet she'll get you at least 23..."

Banks & mortgage companies are selling mortgages, not houses, happiness, or financial stability. If they have the legal excuse/ability to bend the rules to be able to advertise lower rates, that may be wrong (I absolutely agree that its wrong), but it doesn't abdicate the buyers responsibility to determine whether they can afford to purchase that mortgage.

The market runs on what is profitable & works, not on moral ideals. Obviously as noted by PP's on this very thread who work in the industry, banks realize that there will be a certain percentage who default, they count on it, and they aren't lending enough money if people aren't defaulting, because they aren't making as much money as they could be.

On a business standpoint, if I have a store & something is sitting on the sales floor, its losing me money, even if I sell it at a loss and make room for something else that will be profitable, or to encourage more people into my store, its smarter for me to do so than to keep it on the floor taking up space & costing me overhead. Banks are the same way, they are in the business industry to make money not the religion or morality industry to make everyone do whats right or be happy. They lend out the money for mortgages and they are still profiting immensely from everyone's interest payments, enough so that if someone in Jennica's position defaults, its not a big enough deal that they care to discuss preventing it with her before she misses a payment. The interest they have received from someone like Jennica already plus the interest they have received from every other home buyer with a loan from their company makes them enough money to lose on some defaults and still make huge profits. (In groceries, this is called a loss leader.)

You can ask a whole bunch of ousted CEOs, and they will tell you that it is absolutely the responsibilty of the lender to determine what the borrower can afford. If it was not, no one would ever lend money to anyone, for any reason, because people would default all.the.time.

It totally depends on the market who the banks will qualify, as you know. 5 years ago when I bought my last home, the market was such that just about *anyone* could get a home loan, regardless of credit. It might be a rotten one (ARMs, balloons, etc etc) granted, but you could get one--which is exactly why so many people are in the situation they are in with their houses. Last year, when the mortgage bubble predictions became a reality, investors started backing out and the banks tightened up to work with only people who would qualify for "ideal" loans-20% down, fixed APR on a 30 year term, and only to people with excellent credit. When we applied for our mortgage on our new house last year, it was clear that the availability of lending is much stiffer because the investors were pulling out and the funds just weren't available to lend in the housing market.

No one, not even a CEO from a lending company has a better idea of how much money I have at the end of the month than I do. (And obviously all the CEOs you are citing aren't overly worried about their "responsibility" because they've been selling irresponsible loans for quite awhile.) No one knows my spending habits better than I do. Advice from anyone, but especially from someone wanting to sell you something very expensive like a mortgage needs to be researched independently of their information with the understanding that they are selling you a product based on a set of assumptions that may or may not be true for your own personal situation. Banks will do what they can to make money, just like any business. If regulations are loosened and it adds up to more profits, the banks will be misleading to get people to buy their product. That does not mean the information cannot be found, it just means the person who loses money if you have the info won't be chomping at the bit to be forthcoming with that information for you.

You can't believe everything people tell you, particularly when they are wanting to sell you something expensive.

[Leta]

Originally Posted by Yooper

Are you me? Seriously?

I grew up in the Ann Arbor area and after messing around with lots of income and still not being able to buy a house, we fled to the UP. And I guess I should not say "could not" buy a house. We were approved for plenty. But I was not comfortable taking on that kind of debt. Now we have our "forever house" for a fraction of what we could get anywhere else, are "irritated" by dh's 5 minute commute, and have figured out how to cobble together a very good life with both of us working part time (and thus being able to both participate in dd's homeschooling education). I cannot image trying to survive in the rat race that my parents did. My mom also lives in a development where she could have sold her house for DOUBLE what it is now worth if she had just gotten it together 2 years ago Now she is flipped on her house and is stuck there indefinitely.

Don't you love it up here? I think that should be the newest bumper sticker, after "Say yah to da UP, eh?" and "Say nah to da sulfide mining!", "Yoopers don't do the rat race." Or something similar, but more catchy.

[Leta]

Jean, I am completely in favor of educating yourself. Completely. I just know what a jungle it was out there.

[Leta]

Originally Posted by beachmouse

I spent a couple of years living beyond the beyond in rural America. The local fire department was volunteer-run, and volunteer subscription. If you made the financial choice to not pay something like $200-$300 to the fire department that year, they would indeed refuse to respond to a call at your house, and let your home burn down, and the worse damage to your home because of no response would indeed be your fault.

Okay, while I take this example to heart and admit that it's a shot in the arm of my analogy, a couple things:

-Most places have basically the same system, but it's compulsory- you pay taxes, and the fire trucks come if/when you need them.

-I would submit that the compulsory system is preferable to the volunteer system, because under a compulsory system, fewer people would be left dead and/or homeless, and thus my original point stands: Institutions exist because it is not just beneficial to society, but frequently to individuals. We all can benefit from the expertise of others.

[KellMcK]

Jennica - I've been following this thread since you started it. While I'm not in your exact situation, I'm about one paycheck away from it. If anything "unexpected" happens, (crossing fingers for good karma) I could very well be facing the same hard choices that you're making right now.

Good luck with everything, and I'd be interested in knowing how it all turns out for you & your family, if you feel like sharing.

[shayinme]

Originally Posted by Leta

The book is called The Two Income Trap by Elizabeth Warren. It is brilliant. .

Yes, that's the book. I could not remember the title for anything, it was a great book and the OP's situation reminded me of that book.

Shay

[ZanZansMommy]

Originally Posted by Bird Girl

Jennica, if things are as you say, and there's no reason to doubt them, then don't worry about outside criticism. It's so much easier to just paint anyone in financial trouble as just irresponsible, when really anyone could find themselves in difficult financial straits. It's magical thinking--trying to make sure that it couldn't happen to them by drawing a big moral line between them and anyone in trouble.

:

Originally Posted by Mothra

Exactly. Please just take care of yourself and your family. You have the support of a lot of us here.

Much love to you.

Ditto!

I love how so many people have the crystal ball of what life may throw them & you have to factor this & you have to factor that. Spare me. You cannot be prepared for any & everything that may come your way. And you can read & read & inform yourself & still get screwed. Depends on where you find the information, who do you believe etc? Not everything is cut & dry. Yes you need personal responsibility & the OP has admitted to that.

We had 3 mortgage brokers lie straight to our faces. Out right LIE. And they both came highly regarded by friends & family who had used them. We could have easily been screwed. They make it look so easy & just blow smoke up your arse.

I am not in your situation OP but I hope you know some of us do realize you looked to someone with the expertise (the mortgage broker/co.) to help you decide if homeownership was something you could afford. They obviously lied to you

[Ginene]

I know how you feel. We bought a house a year and a half ago and in 2009 our arm will go up and I can't see us refinancing or getting out of this. Either we are going to have to make more money or sell the house.

If you are interested in work from home jobs. Here are a few. Maybe this can help you. If you can work at night or while the kids are sleep because you do need a quiet background.

www.west.com
www.liveops.com
www.alpineaccess.com (pays hourly and you are an employee)
http://www.datafrenzy.com/ajilon/job_search.asp

You can find a list here that is sorted alphabetically and they list the pay
http://www.ratracerebellion.com/CS_Comparison.html

[sarasprings]

Originally Posted by ZanZansMommy

I love how so many people have the crystal ball of what life may throw them & you have to factor this & you have to factor that. Spare me. You cannot be prepared for any & everything that may come your way.

No you can't, but if you are stretching yourself when you have only one income and don't have the buffer of a second, that's not being responsible. We spend over 50% of our income on housing because we were planning on me working part time and it didn't work out. But, we've cut back on everything else to make it work and we have savings in case we need it. Even if the price of everything has skyrocketed. If a family has emergency savings in place and savings as part of their budget, it should buffer the "unexpected" cost of things.

Unfortunately, a house is a huge thing to be making a financial mistake on. I do agree that banks were handing out loans that were too high, but it's still a decision.

My main question, though, is

[jennica]

Originally Posted by normajean

I forgot to mention that the total payment is calculated including taxes & insurance on the mortgage. I wasn't specifically talking about your debts, just explaining how to calculate in car payments etc since you were frustrated with the online calculators that don't account for everything.

I know, but the calculator was thrown at me to say, "see, you should have found one of these and seen that you couldn't have afforded your place!" I was pointing out that I, with zero debt at the time, could input my income, and Joe Shmoe who makes the same amont as me with $600.00 a month in car and credit card debt could input his and it would spit out the same results. Therefore, I never saw these things as that indivualized. That was my point, not that I was frustrated with them.

Originally Posted by normajean

I don't believe walking away from your mortgage is really going to be easier in the long run when you have the option to refi at a better and fixed rate.

Better than the ARM adjustment, but worse and $100.00 a month higher than the original payment.

Originally Posted by normajean

Yes it may mean another 3 years that are stressful, your having to find a way to bring in an extra $3-500 a month and living very frugally in a house that you hate. However you will still have your good credit, the market will eventually return, you will have at least *some* equity and will be able to sell your house and still have the option to buy something you like and can afford.

This is totally speculation on your part. We don't know how long it is going to take the market to recover, or whether I will walk away from this with some equity in the end, unless I stay here long enough to pay down my mortgage by thousands and thousands of dollars. If I were to follow this advice it would be huge gamble that I would need to take. Do I cut my losses now, or do sit and hope that the market will get better someday.

Furthermore, as Selesai pointed out, we need to make 75% more money than our mortgage costs us in order to afford to live here. I did not know that until she pointed it out. So, I would not need $3 - 500 more a month, I would need $2200 more a month of take home pay, after taxes and daycare and everything are taken out of my check. If we pretend that I would make 10 dollars an hour, which I have never made by the way, then I would need to work about 80 hours a week to bring home enough pay to pay for daycare and to have $2200 left over. $3-500 is what I would need to get back to a zero balance. It would not pay for anything additional, like childcare, future car payments (both our cars are over 10 years old), car maintanance, savings for ourselves and for Ds's college fund, clothing, emergencies, and any other misc. expenses that should pop up like rising heating and gas bills.

Originally Posted by normajean

If you short sell you damage your credit & still probably have to pay back at least part of it. Quite possibly the difference you save on renting will have to still be paid to the bank on a long term, high interest, unsecured loan if you can even get it. Then you might be able to afford to buy a house 10 years down the road when you've paid off the difference, if you've also been able to squeak out some savings for a 20% down on a new house.

I already stated that I offered to pay the bank the difference and they wont accept it. They say I can't pay them back because I need a loan, which they wont give me because I wont have anything to secure it with. The provision of a short sale is to provide people in my situation a way to work with the bank and avoid foreclosure while still selling their home and moving on. The debt is forgiven by the bank, and the short sale will bring our credit score down a few notches, but it wont look nearly as bad as a foreclosure. So, you are wrong on this, we wont owe the bank anything, and we will be able to buy again in the future. Quick sells are generally overlooked I've been told from multiple sources.

Originally Posted by normajean

If you walk away your credit will be completely destroyed, and if you can get a rental, (landlords are doing background checks, and rental prices are going to go way up because the housing market is feeding a rental shortage-we are headed into a market where its much cheaper to buy than it would be to rent the same house) eventually when the market works itself out you won't be able to buy a house at a good interest rate. If you do it anyway, your mistake of walking away from this mortgage is going to cost you in higher payments for the next 30 years after that, because you may qualify for another mortgage, but it you won't be offered prime.

With any of your options, it sucks. Just like I will with my truck, you are going to have to eat the mistake someway or another, its just a matter of whether you want the financial "sick to your stomach" feelings to last 3-5 years or 30 years.

I doubt that we will be able to afford a home (if you go by the 25% of our take home pay should go to mortgage formula) for years and years and years and years. By then we will have built our credit back up. Furthermore, I have talked to several people about this and they have all told me that quick sales are often times overlooked if your credit is good otherwise. I think if a lender 10 years down the road sees a quick sell in 2007, the probably wont even care at all about it. It will be one of many thousands of quick sells and foreclosures that they will see on a continual basis from this year and the next few to come. To say my credit will be completely destoryed is a bit of an exageration. Yeah, it ain't gonna be good, but come on, it's not going to be completely destroyed. I built it up to an excellent credit score once and I'll do it again. It's not the end of world, and frankly, I don't care if I ever own a house again. I don't know if I will ever be able to afford to anyway, so we may just be life long renters. Oh well.

[jennica]

Originally Posted by Selesai

Your comments are a little hurtful to me. I tried to make it clear that I wasn't talking specifically about YOU in my post, but given that you started this thread, I know that's difficult to do.
I think it should be recognized that there is a difference between paying 25% or 50% of one's income to rent, and paying that same amount to a mortgage. When you rent, you do not typically have as many utility or repair costs-- no taxes, etc. So paying more of your check for rent is likely more secure than paying that amount towards a mortgage, when a mortgage is not the only cost of home ownership.

My comments were hurtful to you? The comments where I complemented you for doing so well financially that you can live by this rule? And the comments where I complented your knowledge of this formula? Um, okay.

[jennica]

Originally Posted by sarasprings

My main question, though, is

Yes? :

[savithny]

Originally Posted by normajean

Um, let's see, maybe "historic guidelines" would be a good place to start, analyzing your own budget, income, expenditures, talking to independent financial advisors who aren't trying to sell you a loan, reading books on homebuying, analyzing the market and predicted trends etc etc etc just like you would do with ANY major purchase.

Yep. Our first house, bought in 1994 -- we read up on all the traditional guidelines, and educated ourselves about mortgages and budgeting.

We sold that one in 1998 (for almost zero profit, but no loss, at least, and moved someplace we could not afford to buy a house. We rented for 8 years.
And we watched the market explode. And we read about people getting 40-year mortages and no-principal mortagages and reversed mortgages, and mortgages for 400% of their household income, and it sounded like the world had gone *crazy*.

And then we were in a position to buy, using our state's first time buyer program, which involves old-school limits, the old percentages, etc, and we were *still* shocked by how much even THAT said that we could "afford." Fortunately, the market was good, but not explosive, in our area. The house we found, if you take the price it sold for in 1999 and add 5% a year, you get what we paid for it in 2006. We're seeing a slowdown but not a catastrophic drop ... and we could not have rented this house for what our payment, including insurance and PMI, turned out to be.

The banks are partially at fault here, yes. The Realtors are partially at fault, too. But so are the people who were ready to shrug off years of financial advice because one mortage company or one realtor told them "Oh, it'll all work out! Really!" (note: OP, this is NOT about you! It sounds like you made the decision you did with the knowledge you had at hand about your current finances)