© 2014 Shmoop University, Inc. All rights reserved.
Financial Literacy

Financial Literacy

Mortgages

.

How Mortgages Work

What is a mortgage? It’s debt, basically, but it’s a special class of debt… debt that is backed by a home you live in. Almost nobody buys a home paying all cash for it. If you are plunking do...

Shmortgageboard

Banking crisis. Housing Bubble. Those evil bankers on Wall Street. You’ve heard the buzz. The lowdown:For a long long long long (long) time, year after year (after year), housing prices generally...

Under Water

One of the big buzz words you’ll hear in housing crises areas is “under water” – it means that the mortgage is worth more than the market value of the house. To wit, your $500,000 home was...

Third Floor, Lingerie; Second Floor, Octopus Hotel

So the home is $500,000 in purchase price with a mortgage of $450,000. Over the last 4 years you paid down $20,000 of the mortgage so now you owe $430,000. Feels great, right? You are making progre...

Brave Buyer or Deadbeat: What Went wrong?

A ton of things. For some reason, a lot of journalists write about these problems being the fault of the banks loaning money. Well, it is clear that the banks were overly aggressive in setting lend...

Mortgage Shmortgage Mechanics

As a soon-to-be tax-paying adult, you should know how your tax dollars are being spent by your government (Hint: A lot of them are going to bail out deadbeats who couldn’t pay their mortgages at...

Why People Buy Homes (vs. just renting or living under the freeway overpass)

People buy homes because it beats the snot out of renting. Ever try to paint a wall in an apartment? You have to fill out a lot of forms and agree to repaint it when you move (and then you actually...

The Lex Luthor Called Leverage: Good, Bad, Ugly

Housing stories weren’t always precursors to horror films. Once upon a time…It was a simpler, kinder, gentler, lower interest rate time. Ma and Pa Shtetl bought their house in Reseda, CA (near...

Thoroughly Modern Milly(onaire) Mortgages

This was what the world was like for a half century, anyway, and buying a home was like a “guaranteed” path to wealth, retirement surety, and HEA (Happily Ever Afterness).Then the gravitational...

Why You Care

A home is the biggest purchase of your life (for most people anyway). It is more than just a stock or bond where you can call your broker and quickly sell. It is one of the few places where dollars...

Mechanics of Finding A Home: The Qualitative Squishy Stuff

What do you think about when you want to buy a home? Is it for you? Is it for you and your dog? Is it for you, your spouse and your dog? Will kids come? In-laws? Interlopers? Derelicts? Old lost co...

What Can I Afford?

There are formulas. In the 1990s when the U.S. economy was still growing, banks would lend to pretty much any buyer who had a pulse. Sorry, zombies. The rough rule of thumb was that a bank would lo...

How Much Should I Pay?

What you pay for a home is relative. In the central part of Nairobi, “expensive” is $1,000 for 3 acres, a view and a mule. In Beverly Hills, you can’t find more than a dilapidated shack for l...

What is a Mortgage and Why Do I Need One?

“Mortgage” is an obligation to pay back a specific kind of loan for a house. The term comes from the Latin “mort” which means death. The notion of a mortgage meant that you would pay it unt...

The Math of Mortgages (MoM)

You want to buy a home, a modern version of Ma and Pa Shtetl… It should be a decent place in a decent neighborhood in a decent part of the country… and let’s say it costs $300,000. Why $300,0...

Different Types of Mortgages

Mortgages come in different flavors: short ones, fat ones, skinny ones, kids who climb on rocks (yeah, Armor hot dogs, the dogs kids love to bite). The most common mortgage is fixed, but just to fi...

ARM

Yes, houses can cost you an arm and a leg, but that’s not what we’re talking about here.The key letter in ARM is “a” and it stands for adjustable. (The whole thing stands for “adjustable...

Negative Amortization

A “neg am” loan is one in which the principal actually grows over time rather than shrinks, as one would intuitively believe if one were “paying off” a loan. Why would someone not pay off a...

Other Costs of Closing

Lest you think that the purchase price of a home was all that was involved when you were finished paying off the bank… usually you have to pay advances on things like taxes and a few monthly paym...

Getting the Best Mortgage

There is always a used Ford truck listed for sale with 6,000 miles. You can get a deal: one tiny scratch and heated seats for $4,246. The name for that car at a dealership is called “bait.” Bai...

The Government and Mortgages

The government has ways to help you out. There are a few wrinkles that you should keep in mind. The U.S. government wants home ownership. To help people out, they do two things:Offer a clearinghou...

Conforming Loans (Fannie Mae/Freddie Mac)

Just like shopping for clothes at department store, when you buy a shirt off the rack, it is much cheaper than having your tailor (or money-grubbing Nana) make one for you. Loans work the same way....

What is Securitization and How Did it Screw Our Financial System?

Securitization is the combining of many individual loans into one security. If you had one semester of Latin, you would have been able to guess this. Provided you still remembered any of it. What y...

People who Shmooped this also Shmooped...

Advertisement
Advertisement
Advertisement