Tips for buying a house........

[Da_Sperm]

But dude most folks get ARMs because they can only afford that amount...so they don't pay the extra amount because they can only afford the ARM amount. When that ARM changes, they are screwed.

That's a reason why folks should be sure they can afford a house in the first place.

Most people lose their house because of changes in their life, not the adjustment of an ARM. Divorce, loss of a job, medical problems, etc. are the major causes (outside of these SUB-PRIME LOANS). A loan adjustment from one year to the next on the average loan will be no more than $100 per month. The ARM adjustment is not the problem.

 

[Tony]

I know that. The fear is...by how much? If you're used to paying more than your mortgage is and your payment rises to what you have been paying the whole time then that's fine. I just would hate to be like these folks losing their houses because they didn't realize how much their payments would increase. If all that is spelled out in the original contract that would be great. The way Sperm spelled it out, you could figure out how much your potential payment would be if it were to adjust to a higher rate. I've never seen a contract so I don't know what it spells out.

Right his said that it could rise 6 points

so 4.5 + 6 = 10.5%

I won't take a chance on having a 10.5% mortgage.

Not me.

 

[jag4life]

Most people lose their house because of changes in their life, not the adjustment of an ARM. Divorce, loss of a job, medical problems, etc. are the major causes (outside of these SUB-PRIME LOANS). A loan adjustment from one year to the next on the average loan will be no more than $100 per month. The ARM adjustment is not the problem.

The ARM adjustment is a change.

Anyway I was speaking about most folks who get ARMs, not most folks overall who buy and lose houses.

 

[Tony]

The ARM adjustment is a change.
.

Exactly I'll find the reports of the thousands of people who say nothing change in their life except for an increase in mortgage payments.

Now add that to rising gas prices etc etc. recipe for foreclosure.

 

[Da_Sperm]

You never know it's based the economy of the country.

Its simple. Look at the current LIBOR Index or T-Bill (easily found on the internet or newspaper) and apply your margin factor and you will get your new interest rate. Take your balance and the remaining years on your loan, go to any mortgage calculator website on the internet and plug in those 3 numbers and you will get your new mortgage amount for the next 12 months.

http://www.moneycafe.com/library/libor.htm

 

[jag4life]

Its simple. Look at the current LIBOR Index or T-Bill (easily found on the internet or newspaper) and apply your margin factor and you will get your new interest rate. Take your balance and the remaining years on your loan, go to any mortgage calculator website on the internet and plug in those 3 numbers and you will get your new mortgage amount for the next 12 months.

http://www.moneycafe.com/library/libor.htm

I am about to go, but I wonder how many people's ARMs went down between 2001-2002 when the Libor index dropped 3 whole percentage points.

 

[Da_Sperm]

I am about to go, but I wonder how many people's ARMs went down between 2001-2002 when the Libor index dropped 3 whole percentage points.

everyone that had an ARM that states the interest rate is based of the LIBOR or T-Bill plus a margin.

I remember being in my credit union talking to the loan officer and I recall the T-Bill was about 1.25 points and I specifically asked his for those loans that adjusted on that day, their mortgage for the next 12 months would be 3.5% (2.25 margin). His reply was YES!. Now, that could mean the rate went UP to 3.5% or went down to 3.5%. At any rate, it was 3.5%.

 

[delock]

I am about to go, but I wonder how many people's ARMs went down between 2001-2002 when the Libor index dropped 3 whole percentage points.

NONE!

It's all a game when it come to real estate. You have to know when to play and how to play.

 

[Fortitude]

For the 3rd and FINAL time:

If you get an ARM; KNOW WHAT YOU'RE GETTING! :|

And beyond that, be HAPPY w/it.

 

[Jacy]

Most people lose their house because of changes in their life, not the adjustment of an ARM. Divorce, loss of a job, medical problems, etc. are the major causes (outside of these SUB-PRIME LOANS). A loan adjustment from one year to the next on the average loan will be no more than $100 per month. The ARM adjustment is not the problem.

I will agree with you about the ARM adjustment not being the problem, but only because most folks aren't as educated about the LIBORs, T-Bills or even the ARMS as yourself. It's no excuse, it's just the truth.

There are different kinds of ARMs. Some ARMs cap your payments, but don't cap the interest (this is how some folks are losing their homes). Some ARMs rates go up or down every six months. Buying a house is an experience in itself, but to have to learn about each loan to choose the right product for yourself is a whole other category.

"The plain old adjustable-rate mortgage spells trouble enough. But three high-risk loans are causing most of the trouble:

• Teaser ARM. This loan features an alluring initial period of very low interest, around 1% to 2%, which later resets to market rates. About 1.4 million borrowers will be jolted back to reality in the next two to three years as their introductory periods expire. Payments on a $200,000 loan at 2% are about $725 a month; at 7%, they're $1,340.

• Subprime ARM. Nearly half of loans due to reset are aimed at low-income people, minorities and people with bad credit -- folks who can't or just assume they can't get a bank loan at a reasonable rate. Many are in a shaky financial position to begin with and so are in greater danger of defaulting. Subprime (also called nonprime) ARMs start high -- 7% or more -- and go higher. And higher. They often feature a fixed, lower-rate introductory period. But when that ends, it's "just the old-fashioned squeezarooni," Cagan says.

• Option ARM. This is the real killer. It gives homeowners the choice each month of paying the principal and interest, just the interest or an even-smaller minimum amount. Every month you pay the minimum, you're deeper and deeper in the red. And up to 80% of option-ARM buyers pay only the minimum, according to Fitch Ratings. Because the minimum payment doesn't cover the monthly interest, the deferred interest is added to the loan balance. After the loan balance grows to a certain point, the lender will demand that you start paying the full principal and interest -- on your now-bigger loan."

http://articles.moneycentral.msn.co...g/OuchYourHousePaymentJustDoubled.aspx?page=2

Most of us folks just don't think like you Sperm, that the ARM will go up, but it will be cheaper in the long run. I can see it in theory, but would not try it-as a single person especially with no other persons income to depend on. I would rather pay a fixed, and pay extra towards the monthly to principle, to expect (maybe not as quickly) similar results.

I saw a lady at a Suzy Orman conference talk about how she is in negative equity....she had an ARM, it jumped, she had just pumped most of her savings into her new business, and now she was going to have to sell her house. And probably still end up paying on it. She quickly saw how easy it was to go from homeowner to homeless, and damn was she depressed. She bought too much house with the wrong loan.

Bottom line is get the loan product you can work-don't let the loan product work you. Everything is not for everybody.

http://moneycentral.msn.com/content/Banking/Homefinancing/P148861.asp

 

[jag4life]

everyone that had an ARM that states the interest rate is based of the LIBOR or T-Bill plus a margin.

I remember being in my credit union talking to the loan officer and I recall the T-Bill was about 1.25 points and I specifically asked his for those loans that adjusted on that day, their mortgage for the next 12 months would be 3.5% (2.25 margin). His reply was YES!. Now, that could mean the rate went UP to 3.5% or went down to 3.5%. At any rate, it was 3.5%.

No it sounds like what you are saying is that the folks who purchased loans and locked in their rates during that time got lower rates than the folks who already had their ARMs. The folks who already had their rates did not see a downward adjustment on their rates.

 

[Da_Sperm]

30 Year Fixed rate mortgage at 7% interest w/ payment of $665.30. Loan after 10 years.
Year => Pricipal (payment)
2007 => 100,000 (payment is 665.30)
2012 => $94,015
2013 => $92,556
2014 => $91013
2015 => $89343
2016 => $87562
2017 => $85647


5/1 Year ARM mortgage at 5% for 5 years then increases 2% until the rate caps at 11% (6pts higher than the intitial rate). We will pay the same amount on this loan ($665.30/month) as we would the Fixed rate loan.

Year => Pricipal (payment)
2007 => 100,000 (payment is 536.82 at 5%)
2012 => $82966 = (payment is 586.39 at 7%)
2013 => $80510 = (payment is $683.00 at 9%) $18 more than the fixed
2014 => $78535 = (payment is 791.74 at 11%) $126.44 more than the 7% fixed
2015 => $77557 = (payment is 791.02 at 11%) $126.44 more than the 7% fixed
2016 => $76467 = (payment is 790.21 at 11%) $126.44 more than the 7% fixed
2017 => $75253 = (payment is 790.21 at 11%) $126.44 more than the 7% fixed

In this example, we compare the ARM vs the Fixd. We pay $665.30 on both loans from 2007 to 2012, the ARM is ahead. In year 2012, the ARM rate goes from 5% to 7%, then in 2013, the rate goes to 9%, and in 2014 the rate caps out at 11% and stays that way. We are force to pay a higher note right. WRONG!!!!!!!

Because we have 20% equity by going the ARM route, we get to DROP the PMI in year 2013 (about 1% of the original note or $100). We take that $100 and apply it to the note and now we are STILL ahead of the FIXED. So instead of paying $665 per month, we pay $775 in year 2013 and so forth. You can see in year 2017 with the Fixed, we don't have 20% equity in the house, so we are still paying PMI.

Year => Pricipal (payment)
2013 => $78314 = (payment is $691.80 at 9%, but we apply $73 toward the principle because we no longer pay PMI)
2014 => $77338 = (payment is 788.80 at 11%) $23 more than the 7% loan with PMI.
2015 => $76375 = (payment is 788.80 at 11%) $23 more than the 7% loan with PMI.
2016 => $75302 = (payment is 788.80 at 11%) $23 more than the 7% loan with PMI.
2017 => $74106 = (payment is 788.80 at 11%) $23 more than the 7% loan with PMI.

At then end of 10 years, we owe $85,657 on the 7% Fixed rate loan and we owe $74,106 on the ARM which has seen its WORST CASE as far as interest rate in concerned at 11%. We were forced to pay $23 more a month in year 2014 on the note because of this.

You guys are so stuck on getting a low fixed interest rate, you don't realize that you are PAYING MORE for a mortgage loan. I HOPE this example sheds some light on you.

 

[jag4life]

Still... MOST folks who get ARMs get them because that is ALL they can afford...which means they really should not get them.

 

[UAPB '97]

Still... MOST folks who get ARMs get them because that is ALL they can afford...which means they really should not get them.

Between Sperm, J4L, & Tony, you guys are all arguing the same point. Sperm is saying that those that CAN afford a fixed rate, CAN afford an ARM. But you must make sure you UNDERSTAND ARMs before getting into one AND have enough discipline to pay the ARM as though it were a Fixed Rate (which, as Jacy posted, most folks DON'T). J4L and Tony like the STABILITY of Fixed Rates. Understandable. In the end, most people should choose what they are comfortable with.

 

[jag4life]

Between Sperm, J4L, & Tony, you guys are all arguing the same point. Sperm is saying that those that CAN afford a fixed rate, CAN afford an ARM. But you must make sure you UNDERSTAND ARMs before getting into one AND have enough discipline to pay the ARM as though it were a Fixed Rate (which, as Jacy posted, most folks DON'T). J4L and Tony like the STABILITY of Fixed Rates. Understandable. In the end, most people should choose what they are comfortable with.

No...I'm totally against them. Sounds like Sperm is totally for them.

 

[UAPB '97]

No...I'm totally against them. Sounds like Sperm is totally for them.

True.

 

[Da_Sperm]

jag4life, do you own a home?

 

[jag4life]

jag4life, do you own a home?

No...but I have. Either way what does that have to do with anything? It ain't hard to know the details of an ARM vs. FRM.

 

[Tony]

and Tony like the STABILITY of Fixed Rates. Understandable. In the end, most people should choose what they are comfortable with.

Exactly! I even want my woman to keep giving
Me the same loving she?s been giving.
Don?t go switching up on me later on, & making me work
Harder to get the same results. Just keep giving me the
Same loving we agreed upon at the beginning.

 

[Da_Sperm]

Exactly! I even want my woman to keep giving
Me the same loving she?s been giving.
Don?t go switching up on me later on, & making me work
Harder to get the same results. Just keep giving me the
Same loving we agreed upon at the beginning.

Me, I want my woman to keep giving me the loving she give me, except every now and then, she can put on a red wig, a few weeks later, bring out the whips and chains, a few weeks later, set out some candles, a few weeks later show off that trench coat with nothing under it, a few weeks later just talk to me. I don't want that same old, day after day, no change in the routine loving. If I get that, I may go out and CHEAT (REFI), because I found something better.

 

[jag4life]

Me, I want my woman to keep giving me the loving she give me, except every now and then, she can put on a red wig, a few weeks later, bring out the whips and chains, a few weeks later, set out some candles, a few weeks later show off that trench coat with nothing under it, a few weeks later just talk to me. I don't want that same old, day after day, no change in the routine loving. If I get that, I may go out and CHEAT (REFI), because I found something better.

Terrible analogy... but still funny. lol

All those things are GOOD things your woman can do when she changes. All an ARM can do when it changes is cost you more money. lol

 

[Tony]

Me, I want my woman to keep giving me the loving she give me, except every now and then, she can put on a red wig, a few weeks later, bring out the whips and chains, a few weeks later, set out some candles, a few weeks later show off that trench coat with nothing under it, a few weeks later just talk to me. I don't want that same old, day after day, no change in the routine loving. If I get that, I may go out and CHEAT (REFI), because I found something better.

HA!

Don?t Go changing trying to please me,


See that?s where, we are different I want that same little lady
I met years ago. That?s who I fell in love with
If it was right at the start, lets make everyday like that day.


I need to know that you will always be
The same old someone that I knew...

 

[Da_Sperm]

Terrible analogy... but still funny. lol

All those things are GOOD things your woman can do when she changes. All an ARM can do when it changes is cost you more money. lol

Terrible analogy? I thought that was good. :LOL:

If you think that ARMs only change upward, then you are misinformed and you need to stay away from them. However, in my previous example (which to me 30 minutes to derive the figures) in which the rate increased and never decreased, it still beat the FIXED RATE product by $13K after 10 years paying the same amount of money per month.

I don't know what else or how else to show you that it beats the traditional fixed rate product.

 

[Tony]

The question, "Should I get a fixed rate or an ARM?" has puzzled every home buyer who has shopped for a loan.


The ARM, of course, is an adjustable-rate mortgage whose interest rate can go up or down. By contrast, a fixed-rate loan locks in your rate for the life of your loan -- there's no need to guess as to where the rate will be next year or in 15 or 30 years.

At first glance, an ARM looks like a heckuva good deal next to a fixed rate. The average ARM rate nationwide is usually less than the average fixed-rate. So far that looks like a no-brainer, right?

The gamble


But there's a gamble involved, and ARM buyers can get burned as a result. With an ARM, your payments are lower for the first three or four years, and will stay low -- provided interest rates in general don't skyrocket. If they do, the lender typically will adjust your ARM rate upward by a maximum of 2 percentage points a year, and a max of 6 percent over the entire loan period.

An ARM that starts out at, say, 5.75 percent can increase to 7.75 percent in the second year, to 9.75 percent in the third year, and to 11.75 percent in the fourth year. Over that period your monthly payment would shoot up from $581 to $1,000. DAMN!!!!

On the other hand, when most interest rates are in a decline, such as during a recession, that tends to keep ARM rates low.


ARMs Are a Hell NO For ME and mine :tdown:

 

[jag4life]

If you think that ARMs only change upward, then you are misinformed

I have asked you 2-3 times in this thread if you have ever seen an existing ARM adjust downward and you have not answered...so I took that as a no.

Have you ever heard of someone having an ARM and after a few years had the interest rate on THAT loan go down? I am not speaking of new loans...I am talking about an existing loan that someone had.