This article left out the most important thing that many homeowners are clueless about. You have to pay the mortgage. That mortgage will also include taxes and insurance which will cost at least a couple hundred more a month. Taxes and insurance will always go up so don't have a mortgage that maximizes the amount you can pay when you first get the mortgage. You also need to start saving money to pay for big expenses to maintain your home such as replacing the A/C, water heater, roof and major appliances.

excellent advice.

Also known as PITI - principle, interest, taxes and insurance.
If it's over 30-35% of your gross income, you're probably in too deep.

Good advice...plus the 50% of this country who are idiots need to watch the snl skit about the financial planning book "Don't buy things you can't afford"

Ya know, that is how you had to do it years ago. Also, remember you had to show 6 months of utilities and mortgage payments amount in your bank account.
People who good buy houses had to work for it, gave them a bit of pride of ownership.

You are exactly right. So why would a bank lend money without checking someone's long term ability to meet these responsibilities, like they used to do? Because it's not in a bank's interest to do so because they got paid up front. If they were forced to keep the paper they sold,(like they used to), we wouldn't be in the mess we're in.

Suggest Google Community Reinvestment Act to understand why junk loans were made.

Read "The Big Short". Great book.
Or watch the Frontline program about it. Also very good.
Banks were making loans they were selling, and didn't have to carry the debt or risk. Ergo - make bad loans and sell them as good loans.
The loan officers got their commissions, we (the public) got left holding the bag.

And... It's still going on. Freddy & Fanny are garbage dumps. f''king corruption is endless and the penalties are non-existent.

You are right, a practice that was greatly encouraged by the Clinton administration.

And GWB admin... and BHO admin... and if repubs win again in 2016, they'll keep the corruption alive and well. This collusion, corruption, graft, and general plundering of the American taxpayers coffers, is far beyond party politics... In fact party bickering is the smoke screen they use to continue their picking of our pockets.

Wait a second, you have to pay the mortgage? I thought you could just stop paying and live free for 2 years before walking away and sticking the bank with the loss and then yell BUSINESS DECISION

You are a very THOUGHTFUL person.

Solid advice that isn't taught as often as it should.

Fitting advice from a person named Harsh. Look at their statistical source "Zillow", where they use the word 'Zestimate', they're not exactly attracting the brightest buyers.

It seems, as though that was one of the reasons, one had to put 20% down. To show, that you save and also pay off the loan.

You didn't have to be a rocket scientist on this issue. Look how many millions of people were stupid enough to get an interest only loan, the concept is just a bad idea for most folks. Schools should have business and personal finance classes that are required just like english and math. Americans would be much better off in the future.

Well , our high schools need to teach basic home economics in school. Our kids don't learn any thing about finances or money management. Maybe they don't do that so the kids that don't have money won't feel bad.

They don't do it because shifting our educational paradigm, which we DESPERATELY need to do in this country, would take actual effort and thought. It's easier to build bigger sports stadiums.

Why don't you get off your phone, this conversation, or any other thing that is distracting you from teaching your own kids about finance and stop blaming the education system.

Considering most people don't understand enough about personal finance and economics themselves, how do you think they are going to teach their children?

Gee, on your theory, why don't we close all the schools and have everyone just homeschool their own kids? After all, all anyone needs to do is get off the phone and drop other distractions and teach their kids all they need to know.

My kids each have savings accounts and no about compound interest. They know about saving, and interest. They also know that using credit cards means that you actually have to pay for the stuff, and that if you don't have the money to pay for something when you use the credit card, you're going to pay a lot more for it after the interest gets tacked on.
That's about as much as they can absorb considering they are still in school and aren't old enough to actually get any credit.

Our schools need to teach Finances to our kids? Really... where are the parents in this learning situation? I taught my kids and it is up to them to make the wise financial decisions.

Putting the bare "minimum" down on a house is the reason most people get into trouble. I was raised with the knowledge, and have had this confirmed by the most experienced in the field - you should actually be putting up to 20% on your down payment. This does several things - it immediately lowers any mortgage costs, allows you to then assume shorter-term mortgages and it ensures you aren't purchasing a property that just isn't within the realities of your budget. If you are one of the people (and the majority of faulty loans were) who purchased, for example, a $500,000 home with 4% down should have NEVER been allowed to buy those homes. If you don't have the money up front you are already setting yourself up to fail. Those folks should only be buying $200,000 homes.
It's that "idea" of free money, credit and so forth. The same way people over-extend on credit cards. Adding to this, it is fair and understandable that most people DON'T really understand the fine print of mortgages. Most homes were also "sold aggressively" with unrealistic mortgages by opportunistic mortgage brokers and banks. The figures exhibit this again and again. A hopeful couple starting a family and wanting to "do the right thing" by owning a home were told wild lies about what their true obligations would be. It's not about insulting people who voted for Obama (most defaults were poor, folks in Conservative governed states - FLA, NV, AZ, CA) so making this "political" is a non-starter. People need to be taught how mortgages work, what the real cost to them will be, and instructed to give the largest possible down payment. All else is just disrespectful insults posted by people with other agendas.

Agreed. A specific example of lowering mortgage payments with 20% down is the elimination of PMI (Private Mortgage Insurance). It may not result in a substantially lower payment, but will shave thousands off the amount you pay in interest.

Totally agree with you. The "under 5%" passage irked me as well. People should not be allowed to purchase under 5% - it is risky for them, risky for the banks and we should not be spending public funds insuring those properties either.

You nailed it! Why doesn't anyone ever explain why one would want to buy a house with only 3.5-5% down? That just seems very irresponsible. Who the hell wants that kind of debt burden hanging over their head? There is a legion of people sitting back waiting on beautiful homes to get foreclosed on - and thats not a bad idea - its a great way to save some dough!

I find it funny the article writer sounds surprised at the ignorance of the average homebuyer

If you think they are clueless about mortages, look at the way they vote.

I had a friend who had terrible credit. He was only able to get a "10 year interest only" mortgage. After paying for 7 years he was "shocked" to find out the principle was not reduced. He was furious and blamed the banks. I told him it wasn't really that decpetive considering the name of your mortgage actually describes what you will be paying for 10 years!

You need to find some smarter friends.

He's actually a graduate of NYU, and makes- $120 an hour as a software engineer. Some people have different kinds of intelligence.

How do you make payments for 7 years and never look at your statement??

Unreal. How do people not know.....ohhhh, they do know but they just want to blame someone else or "hope and change" their way out of it.

I remember seeing Obama showing people that had mortgages and they said they "did not know what they were signing".....well, if you do not know the basics (APR, Variable rates, fixed rates, etc,) then YOU SHOULD NOT BE GETTING ANY LOANS

It would sure help a lot if they taught things like this in your one semester of required high school economics class. As it stands most kids graduate without an ounce of financial education and that needs to change.

Then we'd have informed voters, neither party wants that.

Most can't grasp the basics and would bet my life on it most seniors wouldn't be able to perform basic math calculations let alone anything else for an economics class or any financial education to make a dent.

Most would if it was required. The #1 problem facing schools is underestimating students. The vast majority of students will achieve at whatever level they are held accountable. I'm not saying it is the only issue, but even those that do just enough to get by will do a whole lot more if that's what it takes to just get by.

That's shortsighted. If we expect that seniors (I presume you refer to high school seniors) are unable to grasp concepts, we assume that they will fail. And when/if they prove us right, we are complicit in their failure.

Let us assume that young people are capable. Let us strive to transfer our knowledge to them as best we can. Let us set the bar high. By believing in the next generation we encourage them to believe in themselves.

You might be surprised on that one. I can't do math to save my life, but I aced my econ class with my eyes closed. Trick is, when you jumble the letters and numbers together I'm clueless, but when it comes laid out as a scenario, I'm golden. I'm one of those weirdos who likes word problems.

True...but I had the good fortune to go to school in NY State, which has great schools. We actually did cover things like this in Home Economics and finance class in my school system.

My only required home ec class was in middle school where I learned to sew and make a smoothie, both things I already knew how to do. In fact, I was a bit miffed that I was being made to sew a hat using a pattern, my skills were light years beyond that. My high school offered home ec, but it was just cooking and I was too busy feeding plants windex and operating a blow torch in my earth sci and 3D design electives.

That's OK. They'll just blame the big bad banks again when they discover they can't afford it. It can't possibly be their own stupidity.

The sad thing about this is it comes years after one of the largest housing meltdowns in history. You would think borrowers would have learned to do their research as a result.

Unless they are fed this info on network TV, they just aren't getting any information at all. The best way to sum up the majority of Mouth-Breathing Americans is with the word "Duuuuuuuhh"..

Don't worry about it. Now banks don't give loans to everybody like they used to do. They are actually checking and re-checking things. Especially if you need a jumbo loan.

This is a fact. Predatory lending was common place at Country Wide before they were bought out by BofA. Mortgage officers were expected to make deals look affordable so they could draw the commission. This practice was admitted by several CW employees......even their fraud control officer.

and lets not forget about the "Special Terms" mortgages Country Wide was found guilty of providing to their washington cronies as well.....

How about an actual solution? Not original to me, but education might help!: A "Life Skills" class in high school (a REQUIRED class) which teaches civics (much needed too!) as well as how interest rates work, mortgages, how to balance a check book, how to care for a baby, how to maintain a home (minor repairs), cooking & basic nutrition, etc... all those things we USED to learn from our parents when they USED to have the time to teach us!

well, there are classes like that. the issue isnt that there are no classes. The issue is teachers dont teach what is necessary. We should do away with schools like false schools that pretend to teach you a life skill and they really do not. I know a few people that use those systems to their advantage, because they already know something and just need a cert. But most of the time, people go to school to get an education and are let down.