Think Before Buying
Posted by: info | April 15, 2007
There should be no reason before rushing to buy a major purchase. No matter what the circumstances require. You may be living with people that are hard to get along with, hard to deal with family members or with dead beat room mates. Whatever your situation don’t rush to judgement before making such an important decision.
A dear friend of mine was living with his father-in-law a few years back. And believe it or not, but it was his wife who wasn’t getting along with the family. She kept pressuring him to make a decision at all cost. He had a plan that would enable them to purchase a home in about three months. She couldn’t wait and almost convinced him to move to a trailer park.
He told her to give him a week to get a home loan. He knew that this would only work with higher than normal interest rates. However, he needed to please her or leave. She wasn’t going to spend any more time at there. This upset him so much. They had all bills paid here including rent, electric, water and food. He had been finally starting to clear up his credit and was on his way to saving up for a down payment. He called a Realtor and started the home buying process.
The Realtor gave him a name of a finance company who could help him. He was already approved for a loan a a 8.5% interest rate. He wasn’t sold on this and wanted to get closer to the 5% everyone else was qualifying for. He took the Realtor’s advice and sought out a loan from the loan officer she told him about. He said he had good news and approved him for a 7.5% adjustable rate mortgage (arm).
This loan forced him to keep this mortgage for at least two years and the rate would be kept at 7.5% during this time. Then the rate could continue to jump for the next three years there after. The rate couldn’t exceed 13.5% at any time. The pressure of his wife was very tense and may have impacted his judgement.
He did think this would benefit him greatly over the 8.5% fixed rate. He had been improving his credit and debts with ease over the past six months. He thought that this would continue and since the interest rates had been dropping for years, he would be able to refinance after the two years and qualify for an even lower rate.
This plan wasn’t good for him. He was in over his head and decided to file bankruptcy. Little did he know this was really going to hurt him in the years to come. The bankruptcy allowed him to keep is car and lower his debt payment in half at the time. However, he didn’t consider the damage the mortgage loan would end up doing. His rate went from 7.5% to 11.5%. Adding more than $300 to his mortgage payment. In addition to this his taxes and insurance increased putting him in a very uncomfortable situation.
With the higher interest rate, taxes and insurance it forced him to have his home foreclosed on. His family had to move in with his mom and now are a lot worse off than they was five years earlier. This is just an example of what can happen when you rush to judgement or don’t make an informed buying decision. Any major purchase takes time, planning and thought to make the best choice.
Tags: foreclosed, major purchase, home loan, mortgage, taxes, insurance, move, down payment, arm, interest rate
Posted in: Mortgages, General |
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