Lesson #3: Mortgages Matter

moms houseLesson #3 in this blog series is:  Mortgages Matter… Read the entire series starting HERE.

Fast forward in my life to 1981…. My parents are now divorced and have sold the home on Vale Road.  They have money to re-invest as a down payment in their next homes, but interest rates are now at 14%.  I said 14%!!!  Yowza.  If you mortgaged $100,000 that would have put your payment at roughly $1200.

Can you imagine?  Now we’re buying homes for $300,000 with approximately that payment.  So how could people afford to buy a home?  I will tell you how.  They shopped for a house not by the price of the home, but by the mortgage they could get on it.

My mom and her new husband, with good credit and “regular” jobs, shopped for homes by the assumable loans that were available on homes.  If a house had an 8, 10 or even 12% assumable loan, that meant good things for any perspective buyer.  And for the seller, it meant probably making more on their home when they sold.

My dad, still self employed as a builder and coming off of a divorce and a tough real estate market, had terrible credit, and documenting his income was tough.  So he was limited to looking at homes where the seller could and would finance the home for him.  Again, it meant that those sellers could dictate the price they wanted for their homes, but they had to be in a position where they could wait and get their money in increments.

The lesson from this:  Mortgages Matter.

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