Since 1776, The United States has boldly declared that it's the one nation where anyone can achieve great prosperity with not much more than hard work and a little luck. Granted it had to figure out how that would constitutionally apply to Native Americans, Africans, and women, but by the 1930s the idea that every citizen should have an equal chance to live a "better, fuller, richer" life developed into what's commonly referred to today as the American Dream. But over the last half century, we've added a corollary to the Dream: home ownership, asserting that owning your own home is a realization of that time-honored American promise. A house does have its perks: there's no landlord, no pet deposits, and ironically, the biggest problem with owning a home is actually owning it.
The subprime mortgage crisis exposed the vast numbers of Americans who weren't homeowners but, mortgage owners, as they'd borrowed the money to buy their $200,000 dream house. When they couldn't make payments inflated by higher interest rates, the issuing firms foreclosed and repossessed the properties proving that the banks that owned the mortgages were the real homeowners. After seeing that, it's only logical to ask why the cost of a home has increased nearly 76 percent since 2000 and if owning a home is even worth it if a bank can just scoop it up after raising your APR without warning. Despite what many believe, most Americans should forego homeownership because of the cumbersome financial burden of a mortgage and the high level of exposure borrowers have to market forces.
The central issue here is the fact that the price of a house in America is too damn high. Looking at 2010 Census Data, we see that the average and median sale prices for homes in 2010 were $272,900 and $221,800 respectively, considerably more than what most of the employed work force will make in a year before or after taxes. So, for Americans who don't earn enough to simply buy their home outright but who still want to purchase a home, a mortgage loan is an attractive option. Mortgage loans have the advantage of spreading that $272,900 over a long period (normally 30 years) while the borrower pays the bank back what they borrowed plus a little interest for the bank being so nice. Definitely sounds manageable with a little extra work and discipline, right? Well, consider the following three examples.
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