Put yourself in math's shoes. Day after day, year after year, middle school and high school students question their teachers as to your importance. And then when they finally start using you, like when they calculate a home's affordability, then they ignore you. Like I have been trying to tell you, math is angry, and it's wearing an Affliction t-shirt (which of course means it knows mixed martial arts or it wants you to think that it knows mixed martial arts).
The fact of the matter is that finding out that you can't afford a home and then not buying that home, is a beautiful thing. It makes you a winner. It makes you wise. But unfortunately, it makes you a financial unicorn. In other words, rare, if not fictitious. It is common for people who can't afford home ownership to question their value and self-worth. However having the discipline and self-control to say no when the math says no, is brilliant. You actually are doing something that protects the entire consumer based economy that we live in. Battle for your future, dammit. Battle.
Who is a better steward of YOUR money? You or a mortgage company? Right, it's you. A mortgage company's job is to make money. Your job is to make good decisions. Affordable is affordable. Relatively affordable is not an option. Yesterday's blog addressed affordable. But you need to understand why affordability is even an issue. I have a story for you. Wanna hear it? Here it go.
A few years ago when mortgage banks were faced with a limited target market of "those that could afford homes", they did what they thought was the best thing to do improve profitability: they grew their target market. They did something that was brilliant with a hint of diabolical. They made homes "more affordable". This doesn't necessarily mean making less expensive homes. This means expanding the definition of affordable. People who never could have afforded homes were all the sudden hot prospects. Initially this isn't a bad thing. It is, in itself, an opportunity extended. However, affordable was a technical term. Affordable didn't mean relatively affordable (like it does today). Mortgage banks kept dropping their lending requirements, and it was that practice which brought forth the sub-prime lending crisis. Banks, although they were making plenty of money on loans that they never should have given, freaked out when hard times hit. They suddenly realized that the people that couldn't afford the homes that they were financing were also in deep trouble.
You can try to trick math, but it will eventually chase you down and show you who's boss. Join us tomorrow as we examine Part 4 of When math gets pissed. We will discuss the glory of renting.
Did you miss Part 1?
Did you miss Part 2?
And here is Part 4.