After the housing market collapsed, followed by the credit crunch, it became quite difficult for people to buy homes. However, now, while still tight, it is becoming easier (than a few months ago) to find a mortgage. So how do you know what to get and what will you be happy in?

Here are some tips from the New York Times:

1) Start with the basics. Put 20% down on your home, get a fixed rate mortgage, and make sure that your mortgage is no more than 35% of your pretax income.

2) Consider your income. Being overconfident in your income will only get you in trouble when it comes to buying a home. You need to make sure that you’re still able to save money every month in addition to paying the mortgage.

3) Bow to the Unknowns. There may come a time when you decide to have children or change your career. If or when this happens, you need to make sure that you’re not caught up in a mortgage that keeps you from doing what is truly rewarding to you.

4) The 8 Hour Rule. If you can’t sleep through the night because you’re worried about how much you’re going to pay for the mortgage or worried about how to pay for the mortgage you shouldn’t be getting the house. If you have to take sleeping pills to help yourself get to bed at night, then perhaps it’s time to rethink the entire home purchase.

There are three more rules along with much more detail about each tip at the article source at the bottom of the post.

I think that there are a lot of things to consider when buying a home; all of these tips are great. Mortgages are not something that should be entered into lightly and should really be thought about because when you’re unable to pay your mortgage then you’re going to have credit problems for a long time and you will also find yourself in a lot of heartache about what was supposed to be your “dream”.

Source

Whenever you look at the overall economy and get discouraged, remember that there are a few upsides to the economy being in the gutter.

First, as a while, we’re borrowing less and putting away more. I suppose that we’ve all been a bit burned by not living within our means. As the credit crunch collapsed the world of the credit markets, people began to actually save more money. Yes, there are still plenty of people out there that are having a hard time getting monthly bills paid due to the high credit card payments they have incurred, but overall savings are up for everyone.

Even with gas prices down, we are actually driving less. When gas prices hit record highs last summer, people took notice and curbed their driving habits. Some of it actually stuck and now that gas prices are just over half what they were a year ago, the roads are still a bit emptier and people are carpooling and finding other ways to get from place to place.

Consumers are actually wasting less when it comes to necessities. Everyone is squeezing the last bit of shampoo out of the bottle and wearing shoes that they would have likely thrown away a long time ago. Consumers are shopping at thrift stores more to save money too; so they’re also using up what someone else didn’t. Thrift stores like Goodwill or the Salvation Army are actually running out of items faster than items are donated.

Out of the new home construction, smaller homes are being built. This goes back to wasting less. With smaller homes, we use less electricity and other resources. We’re saving money with smaller homes and leaving a smaller footprint on the earth. The average size for a new home that was being constructed has decreased for the first time in 10 years by 11 percent or nearly 300 square feet. Smaller houses also means that we’re using less resources to actually build the houses; there is less wood, wiring, and piping.

Finally, people are actually eating healthier. Red meat sales are down while the sales of poultry, fruits, and vegetables are up. Consumers are shopping more at local farmers’ markets, where produce is not only fresher, but is also typically cheaper than stores like Wal-Mart. This is also a great way for local businesses to start picking up. When people purchase more at farmers’ markets, they are putting the money back into the local economy.

The CEO of Citigroup, Vikram Pandit, delivered a speech to end the first day of the National Summit in Detroit. The purpose of the summit is basically just a meeting of the minds, business, economic and government leaders, to develop strategies to keep America competitive in manufacturing, energy, technology and the environment. Citigroup has been under a lot of scrutiny for the way their business has been handled, irresponsible loaning and receiving so much TARP money, which has also arguably been mishandled.

In summary, Pandit told the crowd that America needs to accept the fact that tighter credit is just going to be the norm now. He says we are in a new world where borrowing will be harder, loans will be harder to get, and tighter, more expensive, credit is just going to be the case, even after the financial market has recovered. “U.S. consumption and credit creation were the two main drivers of growth. The world needs new drivers of growth — and a new business model,” Pandit told the crowd at the summit.

He said he expects loans to be more scarce and expensive. Those smaller APRs are a thing of the past in his eyes and even as recovery occurs, banks will be careful with giving out loans, almost to a fault. He also expects corporate restructuring over a number of industries. He acknowledged that Citigroup has received ample assistance from the government and praised “strong government action” for the position they are building themselves back to. He also mentioned that Citigroup has restructured its business plan, cutting costs by 25% and work force by 20% as well as lessening their dependence upon credit and consumption.

He also blamed the credit crunch on unregulated banks that he accused of being a “shadow banking system” that packaged wholesale funding into student loans, home mortgages and credit cards, a format that was responsible for over half of credit over the last five years. Pandit also blamed the “shadow banking system” for a large credit gap when that market fell apart and credit was withdrawn.

It is obvious that we are in a new age of credit with more regulations on credit cards that will cause credit issuers to implement new fees and heighten APRs and tighten up credit, at least for a time, but are we really to the point where we can no longer rely on credit? That may also backfire, because you will see less consumers worrying about their credit scores and financial institutions will lose money from lack of credit issuing. Restructure all you want, but no financial institution can rely so little on profit from borrowing that they will be able to tighten credit that much. It sounds like another one of my infamous ‘self fulfilling prophecies’, as the credit market will ‘cut off its own nose to spite its face’ and the financial institutions will forbid themselves from further growth. What do you think?

PricewaterhouseCoopers (PWC) in the United Kingdom has said that the current credit crisis has wiped out 1.9 trillion pounds in wealth in the United Kingdom alone. The loss equates to 40,000 pounds lost per person in the UK over the age of 18. Home prices in that country have also fallen by 17% to just over 150,000 pounds on average for a home.

Another company, the Financial Services Authority (FSA) estimates that if home prices were to fall 30 percent from their 2007 highs, 2 million United Kingdom homeowners would fall into negative equity. At the end of December 2008, Lloyds Banking Group estimated that one in every six homeowners in the United Kingdom is already having a problem with negative equity in their homes.

Poor credit situations have led to many people being unable to get credit. Every day it seems there are more credit card and loan applications that are rejected. It is hard to watch families find themselves in the situation where they do have to try to hope that credit cards will help get them to the next month.

When there was so much wealth going around just two years ago, it is hard to see how things ended up the way they are now. The credit crunch has eliminated a lot of desire for unnecessary items. Families are starting to have to find new things to do to entertain themselves. Frugality has become the new “trend.” It seems that the more frugal a family can be, the better prepared they are for whatever may come their way. This is the way it should have been though. There shouldn’t have been as much needless spending. There should never have been people getting into mortgages they knew they couldn’t afford, and on the same note, there should have never been banks falsifying documents to make it seem like those people could afford those homes.

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When JPMorgan took over Washington Mutual, the largest bank that failed during the credit crunch, WaMu had around 42,000 employees.

This announcement isn’t really a surprise because JPMorgan couldn’t possibly have a use for every single employee brought over from WaMu. I’m honestly surprised that more employees weren’t cut. Then again, this probably won’t be the last announcement.

The reason for the drop is the credit crunch and fears about global recession. Today Brazil markets had to stop trading temporarily to stop a free fall in their markets.

A year ago Thursday the Dow hit it’s all time high at just over 14,000 points. We’re down 30 percent from that point. You can just see how bad things have gotten on Wall Street in the past year.

Even with the bailout plan, we can’t expect to see any changes in the near future.

Hopefully whomever is elected in November, will make a real change in America and in our financial system. Regulation is needed, as awful as it is, we need a figurative parent to watch the financial companies to punish them when they decide to put themselves first.

Well first the markets should become less volatile. It has also raised the FDIC insurance on deposits from $100,000 to $250,000. Which would make some depositors feel safer about leaving their money in the bank.

However, the bailout rescue plan will not stave off a recession if it is to occur. We’re losing jobs faster than people can find new ones. In September 159,000 jobs were lost (this is the largest one month drop in 5 years). Companies are letting go of people because they’re worried that consumers will cut spending. This is a very negative cycle. Another problem is that even though the bill was put into place to help alleviate the credit crunch, it will be a while before banks will start lending again. They are still dealing with bad mortgages and defaults on loans, the rescue plan is going to help with those. After the bad loans, perhaps in a year or so banks will begin lending again.