Thank goodness you used a very reasonable approach. I’m not saying that everyone that does an ARM is “stupid.” However, it is a risky proposition for many and I think the variable of “planning to sell” a house within a couple of years is a variable that is to easily influenced by markets like what is in MI right now.
I have a friend, and fellow FReeper, that relocated out of state. He bought his house a few years ago (I think 6 years ago) for $145ish, then pulled a little equity out so that his current mortgage balance is about $152K. His vacated home is currently on the market for $138K.
The market is a mess.....let’s hope it turns around soon.
A lot of the other folks with bad ARMs are first-time home buyers, and largely uneducated in real estate or finance. Not necessarily stupid--it can be very difficult to know what questions to ask of a lender. Too often buyers rely on the advice of their real estate agent, which is the worst possible mistake to make. Agents are interested in 6% and nothing else. Once you sign that mortgage, they don't give a damn what happens to you.
I must admit, it has been my own lack of education with regard to finance and real estate that has saved my butt (yes, I am calling myself stupid!). I know I'm not an expert, so I ask every possible question I can dream up, great big long lists of them. I don't sign anything until I have all of those questions answered in language I can understand. Then, I do the math, figuring out every possible scenario. If there is any possibility that a mortgage is too risky five years down the road, it is too risky now. Kind of funny, really--I am quite a thrill-seeker in so many aspects of my life, but when it comes to finances I'm the most sober person you'll ever come across.
Just an aside: The house next door to me was foreclosed last summer (4bed, 2 bath, 1700 sf Vic). An Arbor Mortgage franchisee bought it two months ago for $50K and just yesterday put it back on the market. I don't know what they have it listed for yet. They haven't done one minute of work on the place, and it needs some attention. Along with their "For Sale By Owner" sign, they have a "Zero Down" sign.
The more things change, the more they stay the same!