4/12/2005

Home loans for people with bad credit

More home loans with higher interest rates are going to minorities and low income borrowers. Some of this correlation is probably based on the fact that a lot of low income households are minorities as well. The article stated that it wasn’t right that minorities and low income borrowers should have to pay more for a home loan. I found myself tossed in my opinions when reading the article. I feel that when I decide to purchase a home, I don’t want to be stuck with a high interest rate because I have a lower income; however, if I don’t show financial responsibility at some point, then I don’t deserve a lower interest rate. I understand that you deserve what you get, but if more individuals could purchase a home with less financial criteria, would that make them more responsible? Would that increase incentives to work hard toward that American dream? Over all could home ownership increase the desire to be more financial responsible, or will giving a break to debtors create more debt?

4 comments:

Dr. Tufte said...

There's a bit of which-came-first-the-chicken-or-the-egg in this sort of story.

The tradeoff is usually presented as something along the lines of wouldn't it be preferable if some group had better access to normal credit markets in place of the lousy markets they have access to.

But there is an alternative tradeoff: should members of some group be glad to be getting lousy credit rather than no credit at all?

If you are worried about issues like this, what you need to ask is if there is any evidence that people were steered into the lousy market when they didn't deserve to be. Unfortunately, this article provides no information on that.

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