The evening news gave me two reasons for optimism tonight. Oh, there was some awful news, as usual — Greece is spiraling towards collapse and threatening to take a lot of the Western world with it. In Afghanistan the outgoing ambassador took the war-ravaged country to task for not being grateful enough, a reasonable assessment given our $2 BILLION investment PER WEEK! How long can we maintain that and fix things here at home at the same time?
But two items caught my attention and gave me reason to hope. First, laws governing mortgages for first-time buyers are about to change. The new regulations will insist on 20% down and the mortgage payment cannot be more than 36% of the buyer’s debt ratio. What does that mean? Quite simple, your monthly mortgage payment cannot exceed 36% of your combined monthly payments for your car, credit cards, utility bills, and anything else.
As the song says, “Everything old is new again.”
When my husband and I bought our first home in 1984 this was very similar to the regulations that were in place. It was not a requirement to put 20% down but if you did you avoided mortgage insurance which was expensive and a hassle. We had to borrow money from dear friends to meet the magic 20% but we made it. And the percentage to debt ratio was then 35%. I recall being annoyed about that and was convinced it would sabotage our chances. But we got our loan and our $600 a month mortgage.
A reporter tonight interviewed a realtor who applauded the moves. She stated that during the real estate boom the percentage to debt ratio could be as high as 64%. Essentially that means that for every $100 dollars you make, $60 could be obligated somewhere else leaving $40 per hundred to go your mortgage payment and pesky things such as food and gas. Not much breathing room…as a lot of people have found out. Another recent news story featured a couple in California who bought a $750,000 home. He was a fireman, she a secretary. He became disabled and now they are in default, their house worth less than half of what they paid for it, and who is to blame? Well, they blame the system and I suppose that is reasonable. But isn’t it also reasonable to ask how a fireman and secretary thought they could afford a $750,000 house?
Well, I’m not here to play the blame game. This is my cock-eyed optimist blog and I am optimistic that lenders will have some tools in their quiver to look at a couple and say, “Gosh, maybe you need to re-look at how much you can afford.”
My second optimistic moment came when this picture of Nelson Mandela and Michelle Obama was shown. Look at these beautiful people. Mandela is 92 and has lived to see the fruits of his labor harvested again and again. The First Lady, with her beautiful children at her side, is only beginning to experience that harvesting but I have no doubt that her life, should she be fortunate to live as long as Mandela, will also have a long list of accomplishments. But in this moment, captured for all time, we see yet another grateful child of the global civil rights fight, paying respect and homage to a great leader. God bless him for all he has done and Godspeed to her for the promise she exudes. ❧