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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

Posted on 08/21/2007 8:18:53 AM PDT by 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.

(Excerpt) Read more at washingtonpost.com ...


TOPICS: Business/Economy; Miscellaneous; News/Current Events
KEYWORDS: allislost; applesonly5cents; breadline; chickenlittle; countonhillary; cropfailures; crywolf; depression; despair; despondent; dustbowl; grapesofwrath; greedyidiots; helpme; highdivefromawindow; hooverville; idiots; mortgage; nohope; nojobs; skyisfalling; soupkitchen; tomjoad; vulturegram; woeisme
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To: New Girl

“Our parents bought homes at our age. It may sound crass, but we deserved a nice home. We did what we had to do to get one.”

This is his problem right here...and this is the problem with a gazillion Americans today.
They base financial decisions on what they feel they “deserve” - or on what their parents had at whatever age.

I’m willing to bet this guy’s parents were better prepared for home ownership - that they didn’t overextend themselves - and that they probably put more thought into how they spent their money.

Anyone who makes a life changing financial decision like this cannot ASSUME that life will continue to go on unchanged!
There will always be expansions/recessions - bubbles and bursts.

People really need to quit telling themselves they “deserve” this or that.
Heck - all of us “deserve” alot of things! But we can’t afford it!


61 posted on 08/21/2007 8:59:31 AM PDT by Scotswife
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To: KarlInOhio

That was my thought too. If they’re making 300 grand a year, a $400kish mortgage even at 10% interest shouldn’t be too bad.

Of course, I don’t know if both of them have $900 Hummer payments, and what their dogwalker charges them...etc...etc...


62 posted on 08/21/2007 8:59:47 AM PDT by RockinRight (Fred Thompson once set fire to a crowd of liberals simply by puffing his cigar and staring real hard)
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To: jennyjenny
Read the article. The writer and his wife make good money.

They did make a rookie mistake. However, I know many FReepers have never made a mistake.

63 posted on 08/21/2007 9:00:46 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Hydroshock

Very likely the first time in their lives they faced real consequences for their bad decisions.


64 posted on 08/21/2007 9:05:04 AM PDT by READINABLUESTATE ("life is dangerous")
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To: Hydroshock
Goodness. Here I sit 5 months from retirement with my house paid off, no debt of any kind and a hefty portfolio, and thank God for giving me the modest lifestyle which has led to those things...

I do feel sorry for these folks; lots of people make mistakes. I'm just glad I come from humble roots, I guess.

65 posted on 08/21/2007 9:05:59 AM PDT by Kenton (All vices in moderation. I don't want to overdo any but I don't want to skip any either.)
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To: RockinRight

15 year mortgages make much more sense than 30s.


66 posted on 08/21/2007 9:12:52 AM PDT by GovernmentShrinker
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To: Dems_R_Losers

Your situation sounds very similar to mine. Think the WaPo will write a story about us? ;-)

Interest only loans are not the root of all evil that the press is making them out to be. But just like guns, in the hands of a moron, anything can be dangerous.


67 posted on 08/21/2007 9:12:58 AM PDT by bw17
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To: READINABLUESTATE

One reason I moved away from the DC area is that it is so difficult to escape the keep-up-with-the-Joneses mentality there. We lived in an 1800-square foot house and drove used cars, and on a combined income of $200,000 we could not afford to buy a bigger home in our neighborhood, and we often felt like we were poor compared to most of our friends who were buying vacation homes, drove expensive cars, etc. When everyone you know has a house nicer than yours, drives a BMW, sends their kids to private school, etc. you can quickly start to feel like a failure if you don’t have all this stuff. This couple may seem like they had a good combined income that they should be happy with, but if they have friends who are lawyers or lobbyists or mortgage brokers, they probably feel pretty middle class.


68 posted on 08/21/2007 9:15:28 AM PDT by Dems_R_Losers (Thanks anyway, Nancy, but we already have a Commander-in-Chief!)
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To: Moonman62

I read the article. I realize they make good money and it sounds to me like they’re not even really in financial trouble at this point. He just wants to be part of the “victim” crowd of the moment. It sounds to me like he still is in a position to avoid any real damage. But, if he is really so worried about what “might” happen to him down the road, he needs to quit spending money on vacations and fire the dog walker. I doubt there is anything in his note that says he can’t pay towards the principal balance if he wants to.


69 posted on 08/21/2007 9:15:37 AM PDT by jennyjenny
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To: GovernmentShrinker

It depends.


70 posted on 08/21/2007 9:16:11 AM PDT by RockinRight (Fred Thompson once set fire to a crowd of liberals simply by puffing his cigar and staring real hard)
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To: 3Lean

My kid did this for almost 2 years for a guy who left his house at 6AM and returned home after 7PM. While he probably should not have gotten the dog, at least he didn’t come home to dog mess every day and the dog didn’t have to go for 13 hours without an outing.

She made good money as a 10 yo and he was happy his dog had some company and a walk in the middle of the day.


71 posted on 08/21/2007 9:18:30 AM PDT by cinives (On some planets what I do is considered normal.)
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To: GovernmentShrinker

Why? Just because of the lower interest rate? Can’t you just get a 30-year, take the extra money you were paying per month on the 15-year, invest it, and be money ahead? (I have a 15-year mortgage, so I’m wondering if you can justify my decision!)


72 posted on 08/21/2007 9:19:30 AM PDT by dinoparty
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To: Hydroshock
"If the economy really tanks, it would likely cause interest rates to fall sharply, meaning that lots of people would lose their jobs, but my wife and I could refinance our house at a much lower rate."

Wait until he finds out that his home is worth 20% less than what he paid for it. Being upside-down in a mortgage, there are no refinancing options.

73 posted on 08/21/2007 9:19:39 AM PDT by moonman
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To: Hydroshock

74 posted on 08/21/2007 9:20:10 AM PDT by dfwgator (The University of Florida - Still Championship U)
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To: Hydroshock
A well-heeled professional couple buys a home in Montgomery County, one of the most expensive real estate markets in the country, with an interest-only loan? Idiots. Even well off people buy in the wrong place and spend way more than they should. They could bought a home for half that amount somewhere else.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

75 posted on 08/21/2007 9:20:36 AM PDT by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: Scotswife
People really need to quit telling themselves they “deserve” this or that.

In the end, most people end up getting what they deserve. Problem is these jerks want what they DON'T deserve :)

Saying "I deserve" such-and-such is newspeak for "You owe me" such-and-such.
76 posted on 08/21/2007 9:20:49 AM PDT by this is my name not yours (Free speech is the escape valve that keeps some people from picking up a rifle.)
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To: Bob J
Many people get ARMs because of the low payment. What they don't realize is the loan terms reset every so often and the monthly payment goes UP. An ARM may make sense if you're planning on moving in five to seven years. But if this is your lifetime home, you want a fixed, period.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

77 posted on 08/21/2007 9:23:24 AM PDT by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: dinoparty

In general you pay a lower interest rate on a 15 yr mortgage than a 30 yr mortgage, so you are ahead right there.


78 posted on 08/21/2007 9:24:52 AM PDT by cinives (On some planets what I do is considered normal.)
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To: PayNoAttentionManBehindCurtain
It may be correct. I just came across another article about a guy who defaulted on a $100,000+ mortgage and then got a big tax bill from the IRS after the foreclosed home was sold for $1.

I believe it's the difference between the value of the defaulted loan and the amount of money paid for the home in a foreclosure sale that is reportable as income.

79 posted on 08/21/2007 9:24:54 AM PDT by Alberta's Child (I'm out on the outskirts of nowhere . . . with ghosts on my trail, chasing me there.)
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To: Hydroshock

LOL, what a genius. I have zero sympathy for anybody who took out an adjustable-rate mortgage in a market with the lowest fixed rates in history. None.


80 posted on 08/21/2007 9:25:23 AM PDT by Lancey Howard
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