Berniek is right: Much of the blame here falls upon the shoulders of the politicians (led by then-President Clinton), who forced banks to begin some rather foolish lending practices. Alan Greenspan certainly did his share to push this concept of "everyone can borrow" during his time as Fed chairman. Between creative financing, no money down offers, and other such options, the government has given people plenty of rope with which to hang themselves. We Americans haven't proven ourselves to be particularly strong in the moderation and self-discipline categories over the last 30-40 years. Also, remember the climate that existed in the 90s, when I bought my first house: Spurred on by the soaring housing prices, people were convinced that buying "as much house as you can afford" was a good move. Housing was considered an investment that couldn't fail. Yes, the experts began preaching about "the housing bubble" long before it hit, but the masses couldn't grasp how this sure-thing could ever fall. And there's always been a (faulty) basic belief that "If I couldn't afford it, the bank wouldn't lend it to me." I fully agree with those who say that Real Estate agents will push buyers to their upper limits and beyond, and banks will lend what they can -- it's all about profits for them. Yet, the home owner DOES also bear the brunt of personal responsibility. After all, who cares most about whether I can afford my mortgage -- and still buy groceries and other things I need? Clearly, it's ME! I reap the rewards or punishments of my decisions, so I should do the math and know whether I can comfortably afford a house (or anything else) before I buy it. However, we've sort of left that thinking behind in today's buy-now-pay-later society. We're constantly told that "we deserve" this or that thing. That if we're going to finance it, we deserve to have exactly what we want. That "everyone" has debt. We've got to get past that.

cordavamom: "He said as long as the house had power he could do an inspection on the whole house, he'd turn on the water etc. The bank is okay with him doing this. Winter is well over, (it's 77 degrees here today). the bank has made no mention of my son having the home re winterized if the contract falls through -- is this normal?" I can't speak for what is normal with a bank. That said, obviously if the house has power and gas, the electrical and HVAC system can indeed be inspectedand of course, roof structural, which are non-utilities dependent. However, IMO, the HI is a fool to turn on the water....as he is bargaining that there are no problems with the plumbing that could cause property damage. Granted, with a 3 year old home, the chance of that being the case is less than with an older home...however, with a foreclosure, all bets are off as far as the norm...as all too often foreclosed properties are damaged due to owners who want pay-back because of the foreclosure (such as those who were duped by the predatory lenders) or, in a divorce, people can get mighty vindictive. Sometimes the damage is obvioussometimes hidden. We had neighbors who divorced. They had a beautifully upgraded home, very well maintained; the hubby was the original owner of the house brand new, pre-marriage. They split because the wife was having an affair; she continued to live in the house with the children...then had affair guy move in with her. Needless to say, soon to be X was VERY upset...the house went into foreclosure. Wife and affair guy moved out. The bank held an open house through a realtorand we were shocked to see what had been done to the insidedamage everywherethe couple who bought it spent thousands on repairsand he was a contractor..so labor was not an issue. That said, your son needs to make certain that the HI carries errors and omissions insurancethat way, if any damage occurs once the water is turned on, the HI has the financial resources with which to cover it....in addition, your son should make sure that there is some sort of condition in the HI contract where your son cant be held for damages due to the HI turning on the water when he hasnt a clue as to whether of not there is a plumbing problem Last but not least, the water should be on for at least 48 hours prior to inspection, in order to determine if there are any leaks as water somtimes needs a while to circulate before some problems can become evident Last but not least, as you son has no claim to the property, the bank, as the owner/seller would be responsible for any required "winterization", unless your son signed something agreeing otherwise Hope this helps

I don't know for sure, but the Reserves fund seems rather low for the size of the overall budget. The deficit is more than half of the entire reserve fund. In my area the association is required to have a reserve fund that is equal to a certain percentage of the overall budget. The other thing you will want to know is the percentage of owner occupied vs. absentee landlord rental units. I lived in an association that was chronically underfunded and in the 17 years I owned there, I paid about $10,000 in special assessments. Some people had to take out second mortgages to pay their assesments. One very large unit had about $20,000 in assessments. If you are not paying into a reserve fund you could suddenly be asked to cough up X amount of money if something needs to be replaced. In my building the entire air conditioning system failed to the tune of $250K or something. Another association had to do a window replacement program, and the special assessments in that associate went all the way up to $40,000 in some unit. That was enough for a number of owners to go into mortgage default. If I buy into a condo association ever again, it will be one that is very financially sound, large enough that individual unit owners don't take a huge hit if there is an unexpected expense, and new enough that some major systems failure isn't on the horizon.

Closing costs come along with a mortgage or more accurately I suppose a loan? There are basically two types of closing costs. Those related to the purchase (aka transaction) and those related to borrowing any money to facilitate the transaction. Those related to the transaction are charged whether you are taking out a loan or not. Examples include title insurance, property taxes, transfer taxes, attorneys' fees, agents'commissions, certain other types of insurance. Some of these charges will be a fixed fee, others based on a percentage of the sales price. Some of these fees are charged by the title company and some by the state/local authority. The second set of closing costs are those related to taking out a loan. The appraisal fee (which is usually a fixed charge - say $350)and the origination fees (aka points - which is based on the amount of the loan. Each point is 1% of the loan amount). Seems like a lot of the closing costs come from the title company - and you have to do that anyway? I.e. why are loan closing costs a big deal? Most people finance their home purchases by borrowing the money. It costs money to borrow money. The largest cost of borrowing money is, of course, interest determined by the interest rate. The other big cost of borrowing is the origination fee, aka points. It's a big deal because it is a one-time charge based on the amount borrowed. So, it's variable. A point is 1% of the loan amount. If I'm buying a $500,000 house, borrowing 100%, and paying 1 point, it's going to cost me $5000 (just drop the last two zeroes on the loan amount.)If I put down 50% and finance $250,000, the point will cost me $2500. Some borrowers find it advantageous to "buy down" their interest rate. They might pay 2 points or more to purchase a lower interest rate over the life of the loan. Other borrowers might pay zero points and buy a slightly higher interest rate. Lenders will often tie interest rates and points together as a marketing tool to stand out against their competition. So, depending on the amount financed and the number of points charged, this particular cost of borrowing money can make or break the loan for a potential buyer. And do mortgage related closing costs go up with the amount of the loan? How why? Some do, some don't - see above. Why? 'Cuz. (LOL) Then depending on the last, only buying a house full price/cash is an advantage? A hefty downpayment and smaller loan gets you (no)where? Not necessarily. Sadly, Mary, this is where the math becomes really important. But a good mortgage calculator with a full amortization schedule can be a big help. It will calculate not only the monthly payment but the total interest cost of the loan (prepare for heart failure) and enable you to model different interest rate, loan amount, and payment scenarios. Stop thinking of it as math and start thinking of it as money...playing with money. So when people talk closing costs - are we talking two types? The type you pay no matter what - say you bought full purchase price - or even inherited a house. And the ones that come along with a loan? Which are loan ones and which are not? Yup...see above. Mary, the best way to understand the total transaction costs of a real estate purchase is to take out your settlement statement from you recent home sale. This is called the HUD-1. Then go to HUD's website and follow the line-by-line explanation of what each settlement line means. You'll see right away that the form is divided into loan costs and other costs. Doing this is akin to doing your taxes by hand. Despite the miracle of tax software, you will never understand our tax system better (and how it applies to you) than after you've done your taxes with paper, pencil, and a good tax manual. Something, each taxpayer should do at least ONCE in their lifetime. Same goes for the HUD-1. It's work but it's good work. Hope that helps. The concepts, guidelines, and rules-of-thumb are important but no piece of generic advice will ever replace working the numbers specific to YOUR situation, your financial needs, your psychology, and your future situation. Mary, I know how much you want to buy a home versus renting. You love "home" - it's a passion, a hobby, and a lifestyle for you. You also want a secure financial future and you have doubts about how these two fit together right now. I think it's great that you keep asking questions and seeking answers. I read that you had engaged a financial planner. As you review your decisions, you might want to start a new hobby - getting past math anxiety by learning more about consumer finances and financial planning. The math is such a small part of it. It's much more a process of thinking and mindset. You might want to see if your local county or community college offers financial education classes. It's a great way to meet people who have similar interests and it can become downright addictive. Fifteen years ago, I didn't know there was such a thing as a financial calculator...now, I carry one with me all the time. Playing with mortgage scenarios, calculating investment earnings, etc. is a great way to pass time while waiting in lines...sort of like having your own financial game-boy. Good luck!