Was the Mortgage a Mistake? (Homeowner just now figures out they are in a hole)

http://www.washingtonpost.com/wp-dyn/content/article/2007/08/18/AR2007081800089.html?referrer=digg ^ | 8-19-07 | Michael S. Rosenwald

[Hydroshock]

Two years ago, my wife and I sat at a long conference table in a mortgage-title office in Bethesda. Sitting next to us: our real estate agent, who drew up our bid on a townhouse in Germantown two days after showing it to us. We didn't get an inspection, and I don't recall going back for a second look. We had to act fast or someone else would get it.

Our bid won the house -- our very own first home -- and now we had to close the deal. The owners sat across the table. They seemed more nervous than we did, perhaps fearing we would have second thoughts -- about our risky interest-only mortgage, about seeing them walk away with a $120,000 profit, about buying a house just as "bubble" was entering the regional lexicon.

They signed. We signed. Price tag: $459,275.

And then, as the saying sort of goes, the stuff hit the fan. The sizzling home market almost immediately began to cool off, which my wife and I sort of ignored. Interest rates started to creep up, and we sort of blew that off, too. We have time. This too shall pass. No worries. Life is good! We bought a flat-panel television, took a nice vacation, bought a dog, hired him a daily dog-walker, and then we got pregnant. We have time. This too shall pass.

[USMCWife6869]

"Obviously, my wife and I do not want anyone to lose a job, even if it would help us, but isn't it bizarre that one of the ways to get out of a risky loan is for other people to suffer? The world is a tricky place, and nobody teaches you this in school."

They used to and probably still would, but the Dems don't want it to interfere with the indoctrination.

[DCPatriot]

First, let me say thanks for your continued focus on the mortgage and real estate market.

What surprises me about this couple....they seem to imply that the mortgage broker and real estate agent were no better than con-artists.

Hey bucko...if we knew when the market was going to go south, etc., I would be a multi-millionaire.

Those same loan programs that he felt he was 'tricked' into accepting worked flawlessly for the buyers that purchased with the same intent as his (selling or re-financing within a few years)...and pocketing a ton of equity as lines-of-credit or cash-out.

He just happened to be the unlucky one to purchase before the market exhaled.

[gracesdad]

A physician and a Wapo staff writer. Yes, they should have a nice combined salary.

[rellimpank]

--I have been flamed before for making fun of the "interest only" loan, stating that we used to call that "rent".

I now realize my error--"rent" usually only caused the forfeit of a damage deposit if you left a place prematurely---

[Alberta's Child]

The problem with this is the IRS will send you a tax bill. The bank will send you a 1099 and a copy goes to the IRS. If the value of the house is $400,000, you get a tax bill on that amount.

Are you sure this is true? In order for the full value of this home to be considered a taxable "event" for the homeowner, it would seem that the bank would have to forgive the $400,000 loan and then sell the home for $0.

[JohnLongIsland]

they’re in for more of a rude awakening when hillary gets elected and they take a pay cut (income tax increase) because this couple is considered rich. and we all know how this fool reporter for the compost is voting.

[New Girl]

Apparently this guys job is to screw up his life then write about it in a national newspaper. No wonder he is so clueless about his money.

LOL! Are we supposed to feel sorry for this guy because he over-extended himself financially? Or better yet, are these the kind of folks we're now supposed to bail out? I can't believe all of the fools who bought into the interest only loans who expected real estate to continue to rise every year. I bought in the same market - 30-year fixed, thank you very much.

[RockinRight]

Shhh...don’t try to inject sanity or logic here...it’ll disrupt the mojo of the thread.

;-)

[ClaireSolt]

My son bought with a no money down, two loan deal, but he refinanced it two years ago. He had the equivalent of a good dp in his 401K, but didn’t use it.

[this is my name not yours]

Not necessarily. The writer and his wife make a lot of money and the mortgage doesn’t reset until 2010.


The problem isn't how much money he's making, the problem is how much he lets slip through his fingers. They may come out of it okay, but look at how much self-imposed stress he's under because he can't manage his money. These folks (and so many others like them) are enslaved by their possessions.

[RockinRight]

Good - so it’s continuing to grow.

Zero down isn’t always bad. It depends on the scenario. If you HAVE money, but would rather not use it, go for it.

However, zero-down for a paycheck to paycheck type can be quite risky.

[OKSooner]

Yes, the mortgage, and the house that goes along with it, was a mistake. Too bad for this chump who signed it...

What does one say about the (let's say) "friends and relatives" who (let's say) "made him feel obligated" to sign it?

Is there enough blame to go around there, too?

[jrp]

No sympathy. No bailout.

[3Lean]

How could you walk someone’s dog every day, getting paid for doing it, and not give away the whole scam by laughing in their face every time you showed up?
That’s what I call self control....

[New Girl]

His wife is a physician — how frightening is that?

[lilylangtree]

“It may sound crass, but we deserved a nice home. We did what we had to do to get one.”

Yep, you sure did!

[3Lean]

If you own your home for more than two years the sale is now tax free, quite an improvement from the old “one-time exclusion” days....

[DCPatriot]

I now realize my error--"rent" usually only caused the forfeit of a damage deposit if you left a place prematurely---

Not if you rented one of my properties.

I would sue you for damages for all lost rental income remaining on the lease.

Especially in this 'soft' market. LOL!

[Snardius]

We bought a flat-panel television, took a nice vacation, bought a dog, hired him a daily dog-walker

P.T. Barnum was right...

[jpl]

Why do people continually believe that they “need” very nice things that they cannot afford?

This is essentially the main purpose of the advertising industry: to convince us that we desperately need something today that we didn't even know existed yesterday.