Mortgage & Loan: People Aren't Learning

As a bit of a personal rant, I'm becoming annoyed at the people I know--mostly young couples--who are talking about buying houses as if it's as easy as going down to the FYE for a DVD or two. These are folks who don't have a pot to piss in or a window to throw it out of, and yet they discuss home ownership as a sure thing.

Now, my problem isn't with the idea of people wanting to buy homes, per se--far from it! No, my worry is that if they're going to be so breezy about buying a house, they'll fall for the same "toxic mortgage" traps that have claimed thousands of homeowners in this slump, and are looking to claim more:

While homeowners with traditional, hybrid ARMs are beginning to feel the pinch of higher mortgage payments, those with relatively new variations, called interest-only and option ARMs, are hurting even more. Considered two of the riskiest loans, they allow borrowers to pay off only the monthly interest on their mortgage or pick from a series of payments each month.Products like these -- once used by sophisticated borrowers with plenty of discretionary income -- are now heavily marketed to middle- or low-income borrowers who need low monthly payments.

Once again, it comes down to shady lenders marketing ARMS to people who aren't ready for them, and ignorant borrowers who aren't paying attention to the serious fine print of these risky ventures.

It's going to take at least another year for the market to bottom out, maybe more. In that time, we as housing bloggers have to push harder to get the public to realize that the best and safest way to buy a home is still the old-fashioned way: Save, invest, and stick to the 30-year-fixed. Anything else is a risk that, quite literally, most buyers cannot afford.

Posted at November 14, 2006 03:31 PM

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As a bit of a personal rant, I'm becoming annoyed at the people I know--mostly young couples--who are talking about buying houses as if it's as easy as going down to the FYE for a DVD or two. These are folks who don't have a pot to piss in or a window to throw it out of, and yet they discuss home ownership as a sure thing. Now, my problem isn't with the idea of people wanting to buy homes, per se--far from it! No, my worry is that if they're going to be so breezy about buying a house, they'll fall for the same "toxic mortgage" traps that have claimed thousands of homeowners in this slump, and are looking to claim more: While homeowners with traditional, hybrid ARMs are beginning to feel the pinch of higher mortgage payments, those with relatively new variations, called interest-only and option ARMs, are hurting even more. Considered two of the riskiest loans, they allow borrowers to pay off only the monthly interest on their mortgage or pick from a series of payments each month.Products like these -- once used by sophisticated borrowers with plenty of discretionary income -- are now heavily marketed to middle- or low-income borrowers who need low monthly payments. Once again, it comes down to shady lenders marketing ARMS to people who aren't ready for them, and ignorant borrowers who aren't paying attention to the serious fine print of these risky ventures. It's going to take at least another year for the market to bottom out, maybe more. In that time, we as housing bloggers have to push harder to get the public to realize that the best and safest way to buy a home is still the old-fashioned way: Save, invest, and stick to the 30-year-fixed. Anything else is a risk that, quite literally, most buyers cannot afford.