Reevaluating The Housing Market

After reading my classmate's blog About the Down Fall of the Housing Market, it got me thinking about where our nation is currently standing in regards to real estate. We hear the world's in a recession and people are quick to blame one another on why that is. In my classmate's referenced blog they stated " Even though the banks made loans to borrowers who they knew couldn't repay, the heads of the banks made huge bonuses based on high volumes and they didn't care if their own companies later failed." I have a slightly different opinion. I do not believe that any corporation went into business and at the end of the day did not care if their company had a long standing future. Should companies have been more careful as to whom they loaned money and services too, of course. I do not believe it is a lenders fault though that the homeowner went to foreclosure. I'd say most people, not all but most want more than they can afford. If given a choice between a Kia and a BMW, most people are going to try and get the one they want to most, right? They know it's out of their price range but they figure they can cut costs somewhere else and they'd sacrifice, if needed, to get what they really want. A home is no different, in fact probably much worse. When a couple is looking for their first home, the bank that approved them for a maximum of what they can borrow,  per their income. Let's say a couple is approved for $175,000 maximum. They look for homes and quickly see the reality of getting what you want and paying the price for it or settling for a fixer upper that is more budget friendly. Well if that couple picks a house that they love but is on the highest end of their budget, they are most likely setting themselves up for failure. If the couple chooses a home at $175,000, paying an interest rate of 6%, that will put their mortgage at $1049.21  before taxes and HOA. If the couple would of been more modest and chose a home with the same interest rate at $125,000, they'd then be paying $749.44. I know $300 a month doesn't seem like that big of a deal but just that $300 may make or break you if you happen to loose your job or become ill. I believe that most corporations are greedy and just out to make the largest profit available but we as the consumer need to know what type of lifestyle we can truly afford. Just because corporations will extend you the credit, does not mean you have to take it!