Marketplace

My guess is that if she wants to go into real-estate, then yes. If she doesn’t then no. With that ammount of energy she could be getting an MBA or maybe even a PhD.

Not a very smart thing to do. Her income is unlikely to increase without an education, and she won’t be able to afford college with that much of a mortgage obligation. Nor will she be able to sell the house these days. I see another foreclosure in the making. How did she even get a mortgage with those percentages?

Young people definitely shouldn’t be doing this. College is the surest way to increase her take-home above $2470/month. Loans for education are the friendliest around when it comes to interest rates and repayment terms.

In her situation, it would have been far better to borrow for school, invest 10% of her take-home in an index fund, save 10% as cash and live on the rest. If she’s getting by on 46% ofher take-home pay, she’d do just fine on 80%. The 10% in the index fund will probably be worth a lot more than the house will 10 years from now.

Putting 54% of your take-home pay in an illiquid asset like a house is never a good idea. The current state of the economy is bad enough, but even if it weren’t, there’s always the chance of some other emergency.

Fascinating story. I’m now 40 and I still haven’t bought a property. I was priced out and scared to death by the insanity of the last ten years so I sat on the sidelines and backpacked Europe instead of buying. Frankly, I’ve also saved a lot of money in my 403(b) account by not buying a house. OK, $100,000 isn’t a lot of money but apparently it’s twice as much as the average boomer who is about to retire has stashed away. I’m still not quite ready to buy. I don’t think the market will bottom until the federal housing credit disappears and people in California, where I live, realize that houses are still above historically normal prices in many neighborhoods. I just hope this young woman does end up buying during an artificial rebound and then many years and a lot of taxes and spending later sell at an inflation-adjusted loss.

Great story. This really focuses on something that was quite prevalent and easy during the 50s, but pretty much impossible now because of the Fed’s and government’s horrible economic policies. Free housing for all!

Why do people still think of/encourage buying homes as a way to make money?

The housing bubble pyramid scheme already burst, at least the residential part.

What is going on here? 3.5% down on a loan amount that is way over rational amount for her income?

So the FHA is already forecasting $50BB of losses leaving all the blood in the hands of the taxpayers and the lunacy of the housing bubble (low down payments and exorbidant loans) is still being perpetuated by the government, EVEN WHEN the banksters have tightened lending standards.

Enough of the rhetoric, I need real change.

I challenge Scratch Pad to follow up this story in 12 months and give everyone the outcome.

One of the most interesting thing any business-related source could do is follow-up stories. I’ve seen a number of highly touted “news” stories of someone’s supposed success quietly fold while the “reporters” have moved on to something new. Paul Harvey was definitely on to something with his “rest of the story” theme.

Wow. It’s as if the last two years never happened. What if she loses just one of her three jobs? Entirely possible given increasing unemployment, with no end in sight. I appreciate how hard she is working, but this is a good example of how government intervention in the housing market is leading to disaster (with taxpayers left to clean up the mess, again).

There are so many things that are wrong with this story: treating a home as an investment when, even with the recent debacle, housing returns over the past ten years have been waaaaay over historical returns in most places leading one to assume, at best, a flat market for quite a while. She started out underwater, we’re on the hook for it, and you are using it as an exemplar. Booh.

To the author and all the feel-good regular PBS/Marketplace people reading this story.

The fact that this is STILL happening shows how we’ve learned NOTHING from this whole crisis and how our bureaucratic misguided government still has no clue what it’s doing or what it’s promoting, particularly on the housing front.

The fact that someone got this type of loan on these terms is RIDICULOUS. And to have GOVERNMENT SPONSORED media actually PROMOTING this is even more insane (the Youth.Org piece certainly makes it out like this is something we should ALL be emulating - ok why? Well because we can feel good about poor 2nd generation immigrants buying homes no matter how insane the loan is of coures? Why? WHY???).

This is not and will never be a good loan and it makes no sense that government-funded programs like Marketplace and the youth station should be actively promoting/lauding the practive. In fact, it’s preposterous.

While I applaud her work ethic and stick-to-it ness, it’s crazy that this is presented in such a biased positive light.

We have learned nothing from this crisis apparently, and I guess the government will from multiple fronts now pressure the FMA and banks into lending at these ridiculous terms and I assume lead us into yet another crisis….

“I don’t think it’s a bad thing that the bad loans occurred. It was an effort to keep prices from falling too fast. That’s a policy.”

Barney Frank, chairman of the House Financial Services Committee on recent FHA lending.

FHA is allowing bad loans on purpose to keep prices from falling to fast which keeps banks from collapsing.

I have a feeling this poor kid doesn’t know what’s about to hit her or why this “policy” is in place.

Since the video linked was only 3:30 long and supposedly she makes a “home v investment” comment after that, I can’t say anything about her motivation. But if she’s thinking of “finding a buyer” and collecting the first-time homebuyer’s credit she’d better understand that to qualify she must use the home as her primary residence for at least 3 years.

I appreciate this lively and interesting comment stream, and I just want to clarify some of the questions that are coming up.

But first something you should know about me. I came to this country to achieve the American Dream. I’m an immigrant and I know the value of hard work and making good, honest choices. I didn’t buy this house on a whim. Buying a house is a risk for anyone, and as a young buyer, I’ve been challenged all along the way. With hard work and sound decisions, I’m planning to prove my doubters wrong.

First, my loan is for 183k which includes my mortgage loan of 155k and my remodeling loan of 29,600 minus my initial deposit of $1,500. My mortgage payment of $1,328 does in fact include my homeowner’s insurance and property taxes.

Secondly, if you subtract my mortgage payment from my monthly income, I’m left with $1,142 per/month, which is plenty for me. I have two credit cards—that I barely touch—a cable bill, gas, food, and utilities. I’m not scraping to get by.

During a time when so many people are losing jobs, of course, I think about what would happen if I lost one of mine. However, I honestly think I am prepared. I have some options. I could find renters for my two additional bedrooms. I’m young and able-bodied and ready to work, so I could probably still get work that other people don’t want. For instance, I could clean floors, windows, etc. I don’t want to be someone that depends on the government to sustain me financially. I was brought up with a work ethic of working hard until the end. If I was really strained financially, I know my family would be there to support me.

Many of the comments asked why I’m not in school. I do plan on continuing my college education. By having roommates, I can cover most of my mortgage, which would help me pay for college. Plus there are people who are twice my age going back to school. I’m only 21; I have time on my side.

I know that my type of loan is controversial to some people, but I’m confident that my house is a good investment. I got a historically low interest rate and paid far less than market rate.

I have to point out that it’s unfair of the reporter on this piece to characterize these homeowners as “underage.” At age 18 you are of legal majority and can enter legally into contracts such as mortgages. Now, if we’re talking about a 16 year old who bought a house, that’s an “underage” homeowner. Anybody over the age of 18 can purchase a home and many do in much of the country where homeownership is still realistic for the average laborer. In the future, you should reconsider labels such as “underage” for people who are legally of age to buy real estate.

Once we get back to where one needs to put down $18k for a $183k mortgage then we may see some light at the end of the tunnel.

I’m interested in knowing how much of a down payment was required for this young woman to buy said house? I’d also be very interested in knowing if the homebuyer tax credit and/or HUD loan was used in lieu of an actual saved down payment and /or closing costs.

I certainly hope that when this story appears on the radio, the point will be made that FHA is in many ways facilitating a continued housing bubble as a matter of policy (Barney Frank was recently quoted saying as much). This, in my view, is the bigger story here.

While in the short term, it does allow some would-be buyers to make a home purchase when they might otherwise not be able to, it is a very open question whether or not it will be in any of our interests in the long run. It almost certainly is, however, in the interest of all the large institutional banks that have also recently benefited from unprecedented taxpayer generosity.

By arresting house price reversions prematurely, through a sort of FHA sponsored ‘sub-prime 2’ (along with the inefficient 1st time buyer tax credit), the banks get a reprieve on the value of toxic assets still hiding (behind FASB 157) on their balance sheets and the government gets some ‘green shoots’ press, but it may not be much more than kicking the can down the proverbial road..

So how — exactly — does one immigrate to the US legally from Guatemala?

And sorry, but in concept the “American Dream” does not include an explicit subsidy from taxpayers. The bare fact here is that such a loan would never be made, e.g. by the private sector, without that.

If all the “American Dream” means today is going heavily into debt in order to own some dump, then things have gone further down the crapper than most of us would’ve thought. And that’s saying something.

She got taken. And so did we.

eh— Denise said her family is from El Salvador, not Guatemala. This is a hugely controversial decision. You wonder how much influence the father has on the kids, and if they were really making their own decisions or just trying to make him proud. It’s hard at age 20 to know what you really want. Maybe it is what she really wanted, or maybe she just didn’t know what else was out there. Personally, I don’t think there is anything wrong with 20-year-olds using their money to travel the world, take classes that would enrich their lives (whether these were academic or not), or doing something that was important to them and not to their parents. Owning a home really forces someone to stay in one place for a long period of time and cuts off that period of exploration. But, then again, if they have enough money, maybe they will do some of these exploratory things despite owning a house…

Sad story. No education. Three low-paid jobs. No time to travel, explore, grow, enjoy. Foreclosure and debt in the future…

This story and the video talk about the incredible dedication to hard work and saving that made this possible. Denise said she put $1,500 into this house. In other words the price of a good set of golf clubs. She is already deeply underwater despite her delusional belief in a $100k profit.

Despite the obvious fact that based on any reasonable underwriting standards Denise cannot afford the house, I can’t fault her for taking what amounts to a Government handout. She has so little “skin in the game” that even an eventual foreclosure will result in her financial gain. California is a non-recourse state, so if she never makes a mortgage payment she can not be held responsible for the cost associated with a foreclosure. Also, it would probably take a year or more to evict her if she defaulted. Her downpayment is equivalent to about half a years rent. No risk on her part since it’s nearly all OPM.

Karen,

I did not look at the video. I read she was from Guatemala here. But you are right, she claims to be from El Salvador in the video.

I don’t see anything controversial about her decision to buy a house. She can buy a house if she wants to; I don’t care what she does. What is inappropriate, i.e. “controversial”, is the government has guaranteed the loan for such an uncreditworthy buyer. Please note that this does not mean anything other than that under traditional underwriting standards — which is what we ought to be using now, certainly for loans guaranteed by the taxpayer — she would not qualify for such a loan.

And I’d still like the question about immigration (status) answered.

She is just fixing it up to rent it out that is how they all do it. She will live in one room and rent the rest of the house out. Sorry i prefer to have a life.

Just by knowing Denise, I have faith in her. You guys don’t know her and are quick to say she is too young or needs to get a life. But has it occured to any of you that this is what she wants to do. She is a very intelligent, hard-working young woman. Maybe this is her dream. Who are we to say she is wrong?

Tracy, What exactly does “that is how they all do it” mean? Is that a racist comment? Seems blatantly racist to me. Just like any other citizen, Denise the absolute right to do whatever she wants (barring the illegal)with her house. Is the green-eyed monster at work here?

The bubble is dead. Long live the bubble!

We’ve seen this movie before. Thanks FHA.

Wow, VeeCee, way to bring racism in where it’s not even mentioned. Thanks for helping us continue to look at people not by the “color of their skin but by the content of their character.”

Beyond that, this story amazes me—not only by the sheer determination of Denise, but the fact that this kind of loan is still being made available, even after everything that has happened in the past few years. I don’t doubt Denise will work hard to keep her home, but the chances of something going wrong (everything from a car accident, to losing one of her jobs) is ridiculously high. While I admire her tenacity, this was not a wise thing to do (for anyone involved).

Finally, to Scott Jagow and the rest of your staff—I am so impressed that you take the time to actually read and comment on the comments! So many news stories online become a giant pit of mindless comments, without any input from those who worked on the sotry. So thank you, for taking the time to truly report and interact with your readers. It’s one of many things that makes Public Radio stand above the rest.

Denise and her brother are definitely living the American Dream: living beyond their means, debt, and pie in the sky dreams that will never be realized.

SHE didn’t buy a home. The TAXPAYERS bought her an absurdly overpriced house, AND gave her $40K to play with.

And in a year, we’ll get to bail her out, too. This country is soooo going down.

Rental properties are a legitimate type of real estate investment. If she is able to rent out the rooms while keeping it her primary residence, then I think she will be doing well. After she increases her emergency savings (if she needs to), if she starts throwing excess money at the house to get it paid off she will have an asset that she can use for shelter (even if the assets value has decreased.) So, this could end very well for her despite what the housing prices are doing - maybe not as well as if she had waited another few years to buy a house, but certainly better than the situations faced by some of the people with whom I graduated from college.

To all of the people getting self-righteous about immigration and gov money in this situation, read this chapter of The Millionaire Next Door and pay close attention to where it talks about immigrants and their children. Actually if you have time, read the entire book. http://www.nytimes.com/books/first/s/stanley-millionaire.html

Also, if Denise and her family are US Citizens then they have every right you have to government money. Don’t like gov handouts? Don’t vote for big government. You only sound like a bitter $$$hole when you single another American citizen or resident out because you think they are getting “your” money unfairly. Who cares how they obtained their citizenship. Obviously they went through whatever was required by our government to receive citizenship because they ARE citizens now. And Guess What? When you pay your taxes, the money becomes “everyone’s” and is controlled by our elected officials. Vote for the candidates who take your side on the issues and get over it. Wow.

To Denise - you sound like a very hard worker and that is something to be extremely proud of. Many people do not have the discipline to save their money and make sacrifices in the short term for their long term well being. If you continue to live beneath your means and make investments you will most certainly be better off than the majority of the people in our country. See if you can make bi-weekly mortgage payments (half the payment every two weeks applied towards principal and interest.) Google the topic - you can save a lot of interest money and pay off your house sooner without having to put extra money towards the mortgage.