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.

[kenth]

A tad off-topic, but the phrase “we got pregnant” bug anyone else but me?

[dfwgator]

Eventually an ARM becomes an ARM AND A LEG.

[angcat]

I think you should have felt better about yourself and to hell with these people that have more material items. You would be surprised they are all probably up to their eyeballs in debt.

[Hydroshock]

I have said it before adn I will say it again. If you can not afford 120% of the total monthly cost of the house on a 30 year fixed with at least 10% down plus closing you can not afford the house.

[caver]

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

I’ve been flamed for asking why people would choose to have a mortgage verses no mortgage. But of course, I don’t want to be in debt.

[jennyjenny]

Yes, it bugs me.

[utahagen]

It’s amazing how many ostensibly well educated people have no grasp of how the free market works.

[penowa]

Am I supposed to feel sorry for this couple who “deserved” a nice home even though they had no down payment, couldn’t afford the payments for anything except an interest only, balloon payment mortgage on the house they chose, priced beyond their range, and waited 2 yrs. before even exploring what they have gotten themselves into instead of asking these questions before signing first? Now he thinks the best outcome is a recession for the country so that interest rates fall? Apparently, it never crossed his mind that he just might be one of those expendable people who lose their job in a recession. Maybe he’s related to somebody at the WaPo and doesn’t have to worry about that. For his sake, I hope so, because as stupid as he sounds, it may be a l-o-n-g, l-o-n-g time before he finds employment again.

[dinoparty]

Absolutely. My wife gets pregnant, not me. This phrase was invented by men who feel left out and want to be included in the pregnancy. Sorry, fella, you’ll get your chance to be involved after the baby is born.

[this is my name not yours]

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.


Thus the wisdom behind "You shall not covet your neighbour’s house; you shall not covet your neighbour’s wife, or male or female slave, or ox, or donkey, or anything that belongs to your neighbour." (Exodus 20:17)

[kenth]

I see it as the same sort of leftist guy who takes his wife’s last name, at least hyphenated.

I guess it’s just more evidence of the liberal mindset.

[latina4dubya]

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

and he also said he and his wife "deserved" to own a nice home... because their parents owned homes at the same age... their parents probably started out small, with what they could really afford and then upgraded through the years... this couple wanted the nice townhouse and nice neighborhood and nice vacations all at once, before they could afford it... for some reason they think they "deserve" it...

[grellis]

...it was the adjustable mortgage rate that is killing them.

Really? Here I was thinking it was their "kid in a candy store," living beyond their means spending mentality. It never occurred to me that math might be to blame.

[Freedom_Is_Not_Free]

Wonderful 1st hand account of stupid, selfish people being stupid, even knowing they are being stupid and not caring bout it, because by gosh “we deserve it”. Stupid people.

[N3WBI3]

Im in a similar spot though because I bought conservatively it wont kill me but I bought a 900sq ft, 142K condo in the twin cities seems like in 6 months the condo market died and not *if* I had to sell I would guess Id get 135 and it would take 6-12 months to get that..

So as my family has grown in the two and a half years we’ve been there we cant move right now... Oh well at least I might be able to rent it to cover expenses until the market recovers..

[Bob J]

They’re only living beyond their means because their interest rate keeps getting hiked. I’m assuming if the interest rate was fixed they would be able to afford all the frills.

[Freedom_Is_Not_Free]

No, they problem is they still don’t know if they will be able to afford the Jumbo or if they will be able to refinance in 2010. Nice incomes or not, they still may lose their home.

[caver]

I’d think the dog would finally want to go home with hired walker. The dog would figure out who’s taking care of him.

[RockinRight]

And although you and I occasionally spar, I would have to agree with that.

[jennyjenny]

He’s sitting on a 5.125% interest rate. It hasn’t adjusted yet and won't until 2010, so the ARM is not killing him. Now, this guy is a WaPo writer, but if he has half a brain, he would use this ARM they way it was intended to be used. He still has time, and it sounds like the means, to do that and it may still be possible to come out ahead in the end.