Lenn Harley wrote a blog today "UNDERWATER"??? WHO'S UNDER WATER?? WHAT'S UNDER WATER??" that I commented on. Lenn's blog covered more than one issue, but one of the issues that she touched on was on credit problems that people are having today. Lenn stated that "about 40% of the American consumer has damaged credit due to the loss of their home, loss of their job, loss of their credit."
This got me thinking about the number of people that come to me each day to be Pre-Approved to purchase a home, and have credit issue on their Credit Reports. The biggest issue that I see on the Credit Reports of people who have damaged credit, whether they presently homeowners or not, is how they have over extended themselves. The reason for this most of the time is because of all the STUFF that they purchase, that they can't afford. So part of the comment that I left on Lenn's blog was:
The majority BY FAR of the credit issues that I see on a daily bases is still due to financial mismanagement of people buying far more STUFF that they can't later pay for. Our society today seems to feel that they are ENTITLED to every toy that there is, and do not seem to think about how they are going to pay for the toys, as a result I see Credit Reports daily that are filled with accounts in collection. People seem to be spending more and more, and giving less and less thought about how they are going to pay for the more and more, after all they have an ENTITLEMENT to have all the STUFF. They are not just underwater, they are drowning in the I want, therefore, I must have attitude.
People today just don't want to wait until they can afford what they want to purchase. Today if you want it, you purchase it, whether you can afford it or not. Purchase today, and if you can't pay for it tomorrow so what, just don't.
Unfortunately this attitude is not limited to the STUFF, it is also part of the mentality that got many people in trouble with their mortgages. They wanted the house, even though in their heart they knew they could not afford the monthly payment, but they wanted it, and wanted it NOW. So the Lender, who today takes all the blame, but does not have access to all of their debts. For example the only debts that a Lender knows about are those that show up on the Credit Report, but those are not all the debts. For example, the Lender does not see, the day care fees, gas bills, food bills, cloths bills, entertainment, etc. Those are all part of their monthly expenses, but the Lender does not have access to that information. The only ones that have access to that information are the people themselves. So the only ones that truly know whether they can handle the monthly payment that a Lender is approving them for on a house, are the ones purchasing the house. But with the attitude of I must have it NOW that I spoke earlier in this blog, many of the decisions were I want it NOW, and I will figure out on how to pay for it later.
Don't get me wrong, not everyone who is in trouble with their mortgage got in trouble because of this attitude. Some got in trouble for reasons that they did not have any control over, like loss of job, or medical issues. But that is not what I see as the majority reason for why people are in trouble with their mortgages. What I see is a combination of the two situations that I have talked about. The first is that they took on a monthly payment that they knew from day one was to much for them to handle, but they wanted that house, and they were going to have it no matter what. And the second was that they could afford the monthly payment, but were not willing to do without all the STUFF. So they bought the STUFF, and the STUFF in combination with the mortgage payment was to much, and they found themselves drowning.
I see one of these two situations almost on a daily bases, and I would venture to say, that other Loan Officers that look at as many Credit Reports as I do, most likely are seeing the same thing.
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Who To Call For Your Mortgage Needs In Connecticut:
George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.
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