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- Dan, "the_country_hick"
- Contributions:4697
Are the ads saying something like
" This loan will only cost you an ARM, a leg, and a HOUSE?"
I see arm's as financial suicide machines. If you can not afford the loan do not buy the product. ARM's are only for those who can not afford the house imho.
" This loan will only cost you an ARM, a leg, and a HOUSE?"
I see arm's as financial suicide machines. If you can not afford the loan do not buy the product. ARM's are only for those who can not afford the house imho.
- Greg Flowers, "Greg Flowers"
- Contributions:32
ARM's (adjustable rate mortgages) have their place, but yes they are riskier than 30 year fixed term loans. What if rates spike and you own the home longer than the fixed term? No bueno. So many things can happen in life in 5 years. The only way I would choose this option is when:
1. I know that I will sell the property in 5 years or less
2. The monthly savings is so significant compared to a 30 year fixed that in 5 years the savings would pay for all the new refinance closing costs AND potential higher mortgage payments for a year.
Most business cycles run about 3 to 5 years anyway, so chances are rates will go up and back down within the 5 year period. I was in lending for 15 years and went through 3 business cycles during that time.
1. I know that I will sell the property in 5 years or less
2. The monthly savings is so significant compared to a 30 year fixed that in 5 years the savings would pay for all the new refinance closing costs AND potential higher mortgage payments for a year.
Most business cycles run about 3 to 5 years anyway, so chances are rates will go up and back down within the 5 year period. I was in lending for 15 years and went through 3 business cycles during that time.
- SoCal_Engr
- Contributions:5666
1. Unless they are sufficiently capitalized to weather a down market, no one "knows" that they will sell in 5-years-or-less, they "hope".
2. Don't know where you were for the past 15 years, but this is (was?) the first sub-5 rates I have seen on 30yr fixed in 20+ years. I'm not an avid rate watcher, but I don't think I've seen rates bouncing around in 5 year cycles.
2. Don't know where you were for the past 15 years, but this is (was?) the first sub-5 rates I have seen on 30yr fixed in 20+ years. I'm not an avid rate watcher, but I don't think I've seen rates bouncing around in 5 year cycles.
- Paul Mondello, "Paul Mondello"
- Contributions:2097
I hate radio mortgage ads!!
It is amazing that these crooked shenanigans are still allowed in today's post subprime ponsi day an age.
The worse ones are on Christian/religious radio stations no less.
Examples:
Purpose Lending
Faith Funding
New Beginning
Great God Home Loans
etc.
...I love God, but I hate Mortgage radio ads!
It is amazing that these crooked shenanigans are still allowed in today's post subprime ponsi day an age.
The worse ones are on Christian/religious radio stations no less.
Examples:
Purpose Lending
Faith Funding
New Beginning
Great God Home Loans
etc.
...I love God, but I hate Mortgage radio ads!
- Steven G. Hinton
- Contributions:98
Are you nice folks aware that when qualifying for an arm the borrowers have to qualify at either the fully indexed rate or the start rate plus 2.0% which ever is higher? if the start rate is 3.00 the borrowers qualify at 5.00%
The maximum loan to value is less for most lenders 75% vs 805 on super conforming (loans between $417,001 to the county max,)
So generally, borrowers are better qualified and would certainly qualify for a comparable fixed loan.
Someone using an arn is doing it because they want to manage their cashflow, not because they cannot afford a fixed loan.
The problems of the recent past came from extra-ordinarily lose fanniemae/freddiemac guidelines that allowed for no income and no asset qualifying, dti ratios up to 60%.and the like.
The maximum loan to value is less for most lenders 75% vs 805 on super conforming (loans between $417,001 to the county max,)
So generally, borrowers are better qualified and would certainly qualify for a comparable fixed loan.
Someone using an arn is doing it because they want to manage their cashflow, not because they cannot afford a fixed loan.
The problems of the recent past came from extra-ordinarily lose fanniemae/freddiemac guidelines that allowed for no income and no asset qualifying, dti ratios up to 60%.and the like.
- Paul Mondello, "Paul Mondello"
- Contributions:2097
Commercial:
We have never seen rates this low, you can get a home loan at 3.75%!! Act now!(Here comes the smoke screen) There has never been a better time to lock in a 30 Year fixed Loan. Lower your monthly payment. Call 800 NEW LIFE
fade...based on a 120 month term, APR of 4.25%...
Phone Call:
Consumer:"Hello, um I would like the 30 year fixed loan at a 3.75% interest rate.
Radio Loan Officer: I am sorry the rate of 3.75% is only for a 10 year fixed...120 months...1 point, maybe...
Consumer: "Um...huh?"
We have never seen rates this low, you can get a home loan at 3.75%!! Act now!(Here comes the smoke screen) There has never been a better time to lock in a 30 Year fixed Loan. Lower your monthly payment. Call 800 NEW LIFE
fade...based on a 120 month term, APR of 4.25%...
Phone Call:
Consumer:"Hello, um I would like the 30 year fixed loan at a 3.75% interest rate.
Radio Loan Officer: I am sorry the rate of 3.75% is only for a 10 year fixed...120 months...1 point, maybe...
Consumer: "Um...huh?"
- SoCal_Engr
- Contributions:5666
@ Steve...
Say what? When I was having ARMs pushed on me, it was to increase the amount of loan I could qualify for - using the first year's rate/payment.
REA/Lender >> If you go with the ARM, you can afford more house.
Me >> No, I cannot "afford" more house. I can "buy" more house.
REA/Lender >> But, you'll either move or refi in the next few years, so it won't matter.
Me >> Um, no...I have no plans on moving. If the opportunity presents itself I might, but I like to plan for the long term.
REA/Lender >> That's nice, but that's not what will happen.
Me >> Thanks for your time, but I'm obviously not your target market.
So, have the qualifying criteria for ARMs changed? Or were they lying to me before? Seems like a lot of people ended up in ARMs that they couldn't afford when the rates went up.
Say what? When I was having ARMs pushed on me, it was to increase the amount of loan I could qualify for - using the first year's rate/payment.
REA/Lender >> If you go with the ARM, you can afford more house.
Me >> No, I cannot "afford" more house. I can "buy" more house.
REA/Lender >> But, you'll either move or refi in the next few years, so it won't matter.
Me >> Um, no...I have no plans on moving. If the opportunity presents itself I might, but I like to plan for the long term.
REA/Lender >> That's nice, but that's not what will happen.
Me >> Thanks for your time, but I'm obviously not your target market.
So, have the qualifying criteria for ARMs changed? Or were they lying to me before? Seems like a lot of people ended up in ARMs that they couldn't afford when the rates went up.
- Pasadenan
- Contributions:21458
"...I love God, but I hate Mortgage radio ads!" -
Well, worse than the lending ads are the gold sales ads and the nutritional product ads. Contractor ads were not much better. Nor the lawyers and counselors and investment advisers... And it was getting to the point that 50% of the broadcast time was commercials. I finally got to the point where if I'm driving I have to listen to something else or nothing at all.
Well, worse than the lending ads are the gold sales ads and the nutritional product ads. Contractor ads were not much better. Nor the lawyers and counselors and investment advisers... And it was getting to the point that 50% of the broadcast time was commercials. I finally got to the point where if I'm driving I have to listen to something else or nothing at all.
- SoCal_Engr
- Contributions:5666
@ Pasa...give me my thread back. :-)
- Pasadenan
- Contributions:21458
Well, I can see someone taking a 7/1 ARM at 3.5% interest, if they structure it so the payments they make would pay it off in the 7 years, and if they only change from the 7 year payment plan if something drastic and unexpected came up, and went right back to the higher payments afterward.
Even if they don't make their 7 year pay-off goal, the amount remaining on the loan when it resets would be low enough that the savings over the 7 years would be sufficient to cover the higher rates for the balance that remains.
Maybe in year 8, they could even pay down the debt with a new 0% interest credit card for one full year of no interest.
Anyway, they need to run the numbers ahead of time and be fully prepared to pay the full loan.
(And no, I don't think the "target market" has changed, but those are not the people that would benefit from an ARM).
Even if they don't make their 7 year pay-off goal, the amount remaining on the loan when it resets would be low enough that the savings over the 7 years would be sufficient to cover the higher rates for the balance that remains.
Maybe in year 8, they could even pay down the debt with a new 0% interest credit card for one full year of no interest.
Anyway, they need to run the numbers ahead of time and be fully prepared to pay the full loan.
(And no, I don't think the "target market" has changed, but those are not the people that would benefit from an ARM).
- Chris Richter, "ChicagoMortgageLoan"
- Contributions:101
This might have been the funniest thing that I have read in a while:
REA/Lender >> If you go with the ARM, you can afford more house.
Me >> No, I cannot "afford" more house. I can "buy" more house.
You know long-term rates aren't looking pretty when you have a 103 basis point spread between the 30 year and 5/1 ARM using Freddie's data. That's more than twice the spread of the last 5 years.
We also have over 65 bps between 30- and 15-fixed compared to 40 bps historical...yet radio commercials of "get that $417k loan for just over $3k/month" probably wouldn't generate calls...
REA/Lender >> If you go with the ARM, you can afford more house.
Me >> No, I cannot "afford" more house. I can "buy" more house.
You know long-term rates aren't looking pretty when you have a 103 basis point spread between the 30 year and 5/1 ARM using Freddie's data. That's more than twice the spread of the last 5 years.
We also have over 65 bps between 30- and 15-fixed compared to 40 bps historical...yet radio commercials of "get that $417k loan for just over $3k/month" probably wouldn't generate calls...
- Andrew Adams, "203K Specialist"
- Contributions:9349
@ Paul...I hate Loan Officers that use God to sell mortgages...."My Faith First" comes to mind....It's more like My Commission First and my Faith is my hook!
FHA 5/1 ARM starting at 3% with a cap of 8% is not a bad deal as long as you can deal with the 8% payment. It would be 10 years befor the rate hit 8% and 7 years before it hit 7 worse case scenario. Even with that knowledge...I still sell Fixed rate mortgages..Fixed rate mortgage rates will never be substantially lower than they are today.
FHA 5/1 ARM starting at 3% with a cap of 8% is not a bad deal as long as you can deal with the 8% payment. It would be 10 years befor the rate hit 8% and 7 years before it hit 7 worse case scenario. Even with that knowledge...I still sell Fixed rate mortgages..Fixed rate mortgage rates will never be substantially lower than they are today.
- wayne lancaster, "funds2"
- Contributions:1177
Most home buyers plan to live in a property more long term than 5 years. The day of corporate America transfering executive employees frequently is over, and to break even with low down payment purchase takes 4-5 years in todays environment. For the rare buyer who does control when they move, a 7/1 ARM at 3.75% or an FHA 5/1 ARM at 3.5% may be worth considering. The FHA ARM is unique because of the 1% max. increase cap per year after 5th year. Worse case average interest over 8 years would be 4.25%. Future is not predictible, but an ARM taken out during past 5 years that is adjusting now is an awesome rate (typically below 3.25%). All that said, I don't believe an ARM should be an option for anyone needing low rate to qualify, first time homebuyer or to buy a larger house.
- Robert Benham, "FHA down to 620 OK!"
- Contributions:776
Problem is not LO's and product. Problem is most consumers are not aware. Who will make those aware that are not lucky enough to find an honest LO?
But Uncle Sam does not believe in prevention. We just need more pills and band-aids!!!
Hi everyone!
- Bradley Slavens, "Slavens Realty"
- Contributions:14
I expect all of the previous loan programs and more to come back... maybe under a different name. They always do. The only alternative is to let prices fall due to lack of financing and I don't think any politician is willing to let that happen...
- Geoffrey ONeil
- Contributions:259
"REA/Lender >> If you go with the ARM, you can afford more house.
Me >> No, I cannot "afford" more house. I can "buy" more house."
As someone who just bought a house, I can honestly say I was pleasantly surprised this did not happen to me.
Me >> No, I cannot "afford" more house. I can "buy" more house."
As someone who just bought a house, I can honestly say I was pleasantly surprised this did not happen to me.
- Kelly Lacey, "kellylacey"
- Contributions:797
Geoffrey-who did you attain financing through? ;-)
Congrats on the new purchase!
Congrats on the new purchase!
- Geoffrey ONeil
- Contributions:259
Thank you Kelly!
Some info shall remain confidential though. =)
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
@Greg,
OK, you covered the rates, as not a big concern in your opinion. What about guideline changes? Can you guarantee what folks can qualify for today, they will also be able to qualify for in the future? What if they can't?
Happy funding, Rudi
OK, you covered the rates, as not a big concern in your opinion. What about guideline changes? Can you guarantee what folks can qualify for today, they will also be able to qualify for in the future? What if they can't?
Happy funding, Rudi
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
Kelly I'll bet Geoff got his loan through (name removed for obvious reasons) because of the free vacation and unlimited fishing trips on his boat.
Happy funding, Rudi
Happy funding, Rudi
- Dave McGhee
- Contributions:18
Every mortgage vehicle has it's place (yes even negative amortized loans), if used properly. The real issue is in how you choose your lender. I would nnever choose a lender based on their radio ads, or other marketing. Search out personal and professional recommendations. It is important to find a lender that will help you choose the right vehicle for your personal needs and situation.
- Andrew Adams, "203K Specialist"
- Contributions:9349
I can not agree with that Dave. Some programs were created knowing folks would fail...Stated w2 program was never had a place or should not have had a place! Just on eexample...
- Clay Branch, "Georgia Loans"
- Contributions:7836
@Dave, the " place" for a newly originated Neg Am loan may be right behind the 1,500,000 FC's in 2011 making it's
place in line #1,500,001. My favorite marketing buzz word for Neg Am loans was always " for the sophistcated borrower".
place in line #1,500,001. My favorite marketing buzz word for Neg Am loans was always " for the sophistcated borrower".
- Dave McGhee
- Contributions:18
@ Clay and @Andrew, I agree with both of you that not all loans are appropriate for every borrower, each vehicle may be appropriate for some borrowers, depending on their situation and sophistication. Again, my point is, it is crucial to have a good lender who has your best interest at heart.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
Referrals have been the key word in this industry since day one. I remember so many Real Estate and Mortgage Professional's business cards that had printed on the back "By Referral Only." The organization By Referral Only I believe still exists today.
If everyone was doing business with a person that wasn't found in a commercial, but was referred to them, why are they experiencing problems with "bad loans" and under valued property that they where told could only go up in value? Does this indicate that blindly choosing a referral was a wise choice?
As in most other areas of life, the person you can count on most, is you! Get educated. Know what you are doing. Don't count on someone else to do this for you.
Happy funding, Rudi
If everyone was doing business with a person that wasn't found in a commercial, but was referred to them, why are they experiencing problems with "bad loans" and under valued property that they where told could only go up in value? Does this indicate that blindly choosing a referral was a wise choice?
As in most other areas of life, the person you can count on most, is you! Get educated. Know what you are doing. Don't count on someone else to do this for you.
Happy funding, Rudi
- Clay Branch, "Georgia Loans"
- Contributions:7836
"Kelly I'll bet Geoff got his loan through (name removed for obvious reasons) because of the free vacation and unlimited fishing trips on his boat."
LOL, I think you nailed it Rudi.
LOL, I think you nailed it Rudi.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
Thanks Clay. At least there's one person that knows of whom I'm speaking. Of course, you know that remark was just in fun.
Happy funding, Rudi
Happy funding, Rudi
- SoCal_Engr
- Contributions:5666
"I agree with both of you that not all loans are appropriate for every borrower, each vehicle may be appropriate for some borrowers, depending on their situation and sophistication. Again, my point is, it is crucial to have a good lender who has your best interest at heart."
As a consumer, it is "crucial" to know that the only person who truly has your back is...you.
This is not to say that there are not pros who you can trust. But, as my dad always said..."Trust, but verify". If you haven't educated yourself enough to be able to verify (and, no, asking for advice on Zillow is not "verifying"), all you can do is "hope". Not a good position to be in.
As a consumer, it is "crucial" to know that the only person who truly has your back is...you.
This is not to say that there are not pros who you can trust. But, as my dad always said..."Trust, but verify". If you haven't educated yourself enough to be able to verify (and, no, asking for advice on Zillow is not "verifying"), all you can do is "hope". Not a good position to be in.
- Norm D Plume, "America Needs Nixon!"
- Contributions:1670
The maximum loan to value is less for most lenders 75% vs 80% on super conforming (loans between $417,001 to the county max,)
which leads to the next question; why are people quoting ARMs on 20% down on agency plus (super conforming)? Since 25% down is required by the agencies one wonders how they'll be able to deliver on their quote. The only way to quote 80% is to quote Jumbo (which a few, but not all, do)
which leads to the next question; why are people quoting ARMs on 20% down on agency plus (super conforming)? Since 25% down is required by the agencies one wonders how they'll be able to deliver on their quote. The only way to quote 80% is to quote Jumbo (which a few, but not all, do)
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
SoCal, on your previous post, you're right on. As a fellow Black Mountain Ranch Specialist, I couldn't have said it better. #:>)
Happy funding, Rudi
Happy funding, Rudi
How to "know" rates are not coming back down anytime soon...
Of course, the ad emphasizes "be sure you will not be staying in the house more than 5 years". But, who can "be sure" about that? Oh yeah, the one's being foreclosed on.
I hate ARMs for the average homeowner, can you tell? :-)
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