Lucky123 0 #1 February 14, 2008 My neighbor is in a world of hurt with an adjustable rate mortgage. He just finished adding a room on the back of his house with hopes of gaining enough equity to get out of the adjustable rate and into a fixed rate, problem is his ran out of money and the outside has not been completed so the appraiser would not appraise his house. This guy has been my neighbor for almost 10 years and we just never talked much or seemed to hit it off like all of my other neighbors. He owns his own remodeling company and has always been more than generous to his family overseas in Germany when ever they need help, too generous. A few years ago I tried to help a buddy out who was doing odd jobs. He asked for my help to buy an aerator so he could make some money. I have 2 girls of my own and I'm not rich by any means but I decided to try to help, I knew what I was getting into but decided the good karma was worth it. In the end I paid $900 and he only paid me $300 back after 6 months so I took the aerator back. It has been sitting in my garage for 3 years. I figured what the hell and posted it on craigslist tonight and sold it for $300 and took the money straight to my neighbors house so he could use it towards his remodel. I don't have allot of money and could have used the $300 but man it felt good to stuff it in his pocket, he would not take it out of my hand. Just a word of advise - DON'T EVER GET AN ADJUSTABLE RATE MORTGAGE. Quote Share this post Link to post Share on other sites
Conundrum 1 #2 February 14, 2008 You are very generous. There are a lot of people who got ARM's and are now struggling to make their mortgage payment. It's sad really, that people don't realize what a world of trouble they can get themselves in with an ARM. Of course, not over-extending yourself helps. Quote Share this post Link to post Share on other sites
BillyVance 34 #3 February 14, 2008 adjustable rate mortgages are to blame for the huge rash of foreclosures out there, plus those affected were borderline able to afford the mortgages when the rates were low. When I bought my house, my rate was 8% fixed. I refinanced a little over a year later at 6.75% fixed. Been there ever since, going on 8 years in this house. I do wish I could have waited an extra year and gotten the 5.25% rate when it bottomed out down there though. "Mediocre people don't like high achievers, and high achievers don't like mediocre people." - SIX TIME National Champion coach Nick Saban Quote Share this post Link to post Share on other sites
AggieDave 6 #4 February 14, 2008 People with ARMs get them not because they have good credit and can afford the house in the first place, as far as I've seen. It sucks that people are losing their homes, but did they take an honest look at their income and what they could afford prior to buying a house?--"When I die, may I be surrounded by scattered chrome and burning gasoline." Quote Share this post Link to post Share on other sites
sartre 0 #5 February 14, 2008 It's not only the adjustable rate mortgages, but the banks' lenient lending criteria. They were giving people credit they just couldn't handle, and people got way in over their heads. Now the mortgage companies are getting a little more stringent in their lending requirements. Unfortunately, that's not going to help all the people currently facing foreclosure. Quote Share this post Link to post Share on other sites
BillyVance 34 #6 February 14, 2008 QuotePeople with ARMs get them not because they have good credit and can afford the house in the first place, as far as I've seen. It sucks that people are losing their homes, but did they take an honest look at their income and what they could afford prior to buying a house? Plus you have to account for some overly pushy real estate agents who try to convince you that you can afford it even when you're not sure you can because it does look tight. That happened to my friend who bought a townhouse and I became his roommate. I quickly found out there was basically no way he could afford the townhouse on his own and not keep all the bills paid. When he got married, his wife was still in college and had no job, and they begged me to stay for a while to help them stay afloat. I stayed for as long as I could stand them. It was only a few months though. They did something I didn't like and I bitched them out, so they made me move out. Boy was I happy to."Mediocre people don't like high achievers, and high achievers don't like mediocre people." - SIX TIME National Champion coach Nick Saban Quote Share this post Link to post Share on other sites
Lucky123 0 #7 February 14, 2008 He screwed up by first off getting the ARM and second blowing through his equity. I have over $70 grand in equity in my house and have always been smart enough not to touch it. I have done all of my own remodeling at a slow snails pace over the past 8 years but it sure is paying off now. Quote Share this post Link to post Share on other sites
Unstable 9 #8 February 14, 2008 This may end up in SC, but something I like about a lot of the Candidates running this time around is that a few of em' are ready to address this problem. It's unethical for a bank or agency to lend more money than they know the people can pay back, but hey, as long as it's out of their hands..... Then it's also dumb for a lot of people to borrow more than they can afford... Good job on being a neighbour to your friend. =========Shaun ========== Quote Share this post Link to post Share on other sites
lawrocket 3 #9 February 14, 2008 Quote It's not only the adjustable rate mortgages, but the banks' lenient lending criteria. They were giving people credit they just couldn't handle, and people got way in over their heads. Now the mortgage companies are getting a little more stringent in their lending requirements. Unfortunately, that's not going to help all the people currently facing foreclosure. Everyone's to blame - the borrowers, brokers and lenders... And everyone's paying the price - borrowers, brokers and lenders.. My wife is hotter than your wife. Quote Share this post Link to post Share on other sites
jsaxton 0 #10 February 14, 2008 yeah, everyone's paying the price all right, even is who paid CASH in the form of a weaqkened economy and possible recession Quote Share this post Link to post Share on other sites
kelpdiver 2 #11 February 14, 2008 Quote DON'T EVER GET AN ADJUSTABLE RATE MORTGAGE. Don't use such a broad place - ARMs have a place, especially the 5/1 and 7/1 types, given how people tend to move about so quickly anyhow. It's just a matter of measuring the discount versus the risk. Also, 30 year jumbos have been commanding quite a premium of late. But yeah, the overall lesson is don't overcommit. I'm mostly content to rent and not worry at all. Quote Share this post Link to post Share on other sites
jcd11235 0 #12 February 14, 2008 Quote Everyone's to blame - the borrowers, brokers and lenders... Among others. Satre was about the lax lending criteria. Also, many of the ARMs have rates that aren't indexed to anything meaningful. Since most banks hold mortgages for only a short time before they resell them, there was only minimal risk to them.Math tutoring available. Only $6! per hour! First lesson: Factorials! Quote Share this post Link to post Share on other sites
squirrel 0 #13 February 14, 2008 My wife and I are investors, and have never used an ARM. I heard a good joke the other day. "Why do they call the adjustable rate mortages ARMs? Because your "arms" go up when you are getting robbed! My wife is a broker, and over 50% of all homes sold in this area are bank owned. I also run a swimming pool service company, many many new accounts from bank owned property. It was crazy 3 years ago, selling $500,000 homes to people making 35,000 a year...damn, do the math, cant work for too long. ________________________________ Where is Darwin when you need him? Quote Share this post Link to post Share on other sites
futuredivot 0 #14 February 14, 2008 Quotedid they take an honest look at their income and what they could afford prior to buying a house? It's not just ARMs, when we got pre-approved, the lender said, here's what you can afford and I called him an idiot. I might could have paid it, best case, but I could not have afforded itYou are only as strong as the prey you devour Quote Share this post Link to post Share on other sites
Guest #15 February 14, 2008 Quote It's unethical for a bank or agency to lend more money than they know the people can pay back, but hey, as long as it's out of their hands..... Then it's also dumb for a lot of people to borrow more than they can afford... Dumb and dumber. mh ."The mouse does not know life until it is in the mouth of the cat." Quote Share this post Link to post Share on other sites
BillyVance 34 #16 February 14, 2008 QuoteQuotedid they take an honest look at their income and what they could afford prior to buying a house? It's not just ARMs, when we got pre-approved, the lender said, here's what you can afford and I called him an idiot. I might could have paid it, best case, but I could not have afforded it I've forgotten what the formula is, but what percentage of your income should the mortgage payment not go over? Say, if I make $40,000 a year, how big of a mortgage can I get without pushing the limits?"Mediocre people don't like high achievers, and high achievers don't like mediocre people." - SIX TIME National Champion coach Nick Saban Quote Share this post Link to post Share on other sites
caspar 0 #17 February 14, 2008 isn't worked out as a multiplier rather than percentage. for example, in the UK it is about 3.3. so at $40,000 p/a you could borrow $132,000. havent bought a home but started looking into it all recently. might be completely wrong..."When I read about the evils of drinking, I gave up reading." Quote Share this post Link to post Share on other sites
Rick 67 #18 February 14, 2008 I have also seen people with the interest only loans you pay the interest but nothing goes toward the principal. I guess if the home value increases it could work but it is a gamble I would not take. You can't be drunk all day if you don't start early! Quote Share this post Link to post Share on other sites
Steel 0 #19 February 14, 2008 Quote When I bought my house, my rate was 8% fixed. I refinanced a little over a year later at 6.75% fixed. Been there ever since, going on 8 years in this house. I do wish I could have waited an extra year and gotten the 5.25% rate when it bottomed out down there though. If your credit is flawless 5.25 was not the bottom. I am at 4.5 fixed.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites
BillyVance 34 #20 February 14, 2008 Quote Quote When I bought my house, my rate was 8% fixed. I refinanced a little over a year later at 6.75% fixed. Been there ever since, going on 8 years in this house. I do wish I could have waited an extra year and gotten the 5.25% rate when it bottomed out down there though. If your credit is flawless 5.25 was not the bottom. I am at 4.5 fixed. I was guessing at what the rate bottomed out at. I stand corrected."Mediocre people don't like high achievers, and high achievers don't like mediocre people." - SIX TIME National Champion coach Nick Saban Quote Share this post Link to post Share on other sites
Steel 0 #21 February 14, 2008 Quote Quote Quote When I bought my house, my rate was 8% fixed. I refinanced a little over a year later at 6.75% fixed. Been there ever since, going on 8 years in this house. I do wish I could have waited an extra year and gotten the 5.25% rate when it bottomed out down there though. If your credit is flawless 5.25 was not the bottom. I am at 4.5 fixed. I was guessing at what the rate bottomed out at. I stand corrected. All cool, I refinanced on May of 04, (previously was at 6.125) . I keep thinking that 6 months before, I could have gotten 4.0, fixed. I wonder if anybody else got 4 flat. I know that everytime a bank calls me offering to refinance me to a lower rate; after I telle them what I have, they sorry can't help you.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites
kelpdiver 2 #22 February 14, 2008 Quote I've forgotten what the formula is, but what percentage of your income should the mortgage payment not go over? Say, if I make $40,000 a year, how big of a mortgage can I get without pushing the limits? the standard is that no more than 28% of your gross should go to mortage, taxes, insurance, and no more than 38% overall for all debts (cars, credit cards). But with that formula, nearly no one in CA could buy a house, so it's been relaxed a bit, allowing the house to be the full 38% or more. For 40k, that would be $1266/mo total at the 38% level. There are loose ratios that you can multiply by your income, but they change based on the interest rates. Quote Share this post Link to post Share on other sites
Broke 0 #23 February 14, 2008 It is not just the ARM that is the cause of the crash. It is also the balloon payment that comes along with those. Especially the low money down loansDivot your source for all things Hillbilly. Anvil Brother 84 SCR 14192 Quote Share this post Link to post Share on other sites
ltdiver 3 #24 February 14, 2008 What you describe happened to my next door neighbor, but he didn't tell anyone he and his family were having trouble. I woke up one morning to find their house vacant. They'd just turned in their keys to the bank and walked away. After 15 years of living there. Very very sad. ltdiver Don't tell me the sky's the limit when there are footprints on the moon Quote Share this post Link to post Share on other sites
sharimcm 0 #25 February 14, 2008 I'm in the process of buying a house. I made DAMN sure the 5.49% was NOT the beginning of an ARM, but a FIXED rate. I had an ARM for the first mortgage I had, and the first time it went up, I thought I was fucked. Luckily, we were able to do a refi to a fixed motgage. "I had a dude tip his black cowboy hat to me after I provided him with a condom outside my hotel room at 3-something in the morning." -myself Quote Share this post Link to post Share on other sites
