Rate/Market updates

j_h_smith · Mar 20, 2017

terp91 said:
I know a couple people who have been able to purchase way more house in the last year and a half than their job indicates they should be able to afford. I'm guessing there will be a small drop in the next five years if the economy isn't strong, or within 15 if it is. Hopefully I'm way off base on these.

But it isn't even just homes, the auto industry is getting in on overzealous loans as well. One of my coworkers just bought a house and a new truck in the same month. How he can pay for both is beyond me. Maybe he never plans to retire so isn't saving anything?

Savings... savings... who needs that? I know way too many people (of all ages) that don't have enough saved to pay for 1 month worth of bills much less the standard 6 month minimum many suggest. I knew guys at work, that counted on overtime to just pay their bills. Imagine that?

This is the real problem that people will have if things go bad for them.

terp91 · Mar 20, 2017

j_h_smith said:
Savings... savings... who needs that? I know way too many people (of all ages) that don't have enough saved to pay for 1 month worth of bills much less the standard 6 month minimum many suggest. I knew guys at work, that counted on overtime to just pay their bills. Imagine that?

This is the real problem that people will have if things go bad for them.

How are people comfortable living like that? Makes it a bit easier to see how people have so many anxiety issues these days.

I put 18% (soon to be 20%) towards retirement and 5% to general savings from every check, and still worry what would happen if I were to lose my job. Eventual goal is to increase retirement contribution to 25% and have a year of mortgage payments and general expenses squirreled away in case of emergency.

OT is for buying guns and other such things, doesn't everyone think that way? If a new handgun costs $X it just means you need to work Y hours of overtime before it can be bought.

MEGARMS · Mar 20, 2017

TheBert said:
Don't blame me for the mortgage industries products.

So what? You want to blame the banks for making a product available in the free market? Seriously? They are in the risk business and will always make money in the grand scheme of things. It is the taxpayer that ends up getting screwed.

Ultimately, it is the responsibility of the consumer to spend within their means. One of the biggest downfalls and risks to this countries well being/security is our debt (over) load.

Don't blame the bank when you are underwater, lose your income, or when your ARM expires and your payment increases to the point you can't afford it anymore. The blame for this falls squarely on the consumer when this happens and the cost is passed on to those of us who were not irresponsible.

TheBert · Mar 20, 2017

MEGARMS said:
So what? You want to blame the banks for making a product available in the free market? Seriously? They are in the risk business and will always make money in the grand scheme of things. It is the taxpayer that ends up getting screwed.

Ultimately, it is the responsibility of the consumer to spend within their means. One of the biggest downfalls and risks to this countries well being/security is our debt (over) load.

Don't blame the bank when you are underwater, lose your income, or when your ARM expires and your payment increases to the point you can't afford it anymore. The blame for this falls squarely on the consumer when this happens and the cost is passed on to those of us who were not irresponsible.

A guy asks a question I answer the question and you go off the rails about my response. It sounds like you got bit or someone close to you got bit by an ARM. Either way you need a nap.

Sent from my iPhone using Tapatalk

MEGARMS · Mar 20, 2017

TheBert said:
A guy asks a question I answer the question and you go off the rails about my response. It sounds like you got bit or someone close to you got bit by an ARM. Either way you need a nap.

Sent from my iPhone using Tapatalk

I got bit, but not because I was an irresponsible borrower.

1. The tax payers got bit hard bailing out those who made irresponsible decisions
2. The economy got bit when the real estate market came crashing down because of those who made irresponsible decisions

As a result, I lost $88,000 on my last house when I sold it in 2014. Stupid me, living below my means and paying off my mortgage early prevented any short sale for this guy. So, you bet I am a bit perturbed when I hear statements like yours. Encouraging someone to engage in dangerous behavior (using an ARM to buy more house than they can afford) is irresponsible in and of itself.

I do wish the banks would tighten up their standards a bit, but their fiduciary responsibility is to their share holders, not the 1% of idiots who bite off more than they can chew and end up losing their homes to foreclosure, selling them short, and/or requiring loan modifications paid for by the taxpayer.

TheBert · Mar 20, 2017

MEGARMS said:
I got bit, but not because I was an irresponsible borrower.

1. The tax payers got bit hard bailing out those who made irresponsible decisions
2. The economy got bit when the real estate market came crashing down because of those who made irresponsible decisions

As a result, I lost $88,000 on my last house when I sold it in 2014. Stupid me, living below my means and paying off my mortgage early prevented any short sale for this guy. So, you bet I am a bit perturbed when I hear statements like yours. Encouraging someone to engage in dangerous behavior (using an ARM to buy more house than they can afford) is irresponsible in and of itself.

I do wish the banks would tighten up their standards a bit, but their fiduciary responsibility is to their share holders, not the 1% of idiots who bite off more than they can chew and end up losing their homes to foreclosure, selling them short, and/or requiring loan modifications paid for by the taxpayer.

The guy asked the purpose of an ARM loan and I told him what the purpose of an ARM loan is, I did not encourage anyone to buy beyond their means.

I lost money on the first house I bought. I paid more for it than I was able to sell it for after I had owned it for 7 years. Was I mad, no, was I upset with the banking industry, no. I did immediately buy another house.

j_h_smith · Mar 20, 2017

MEGARMS said:
So what? You want to blame the banks for making a product available in the free market? Seriously? They are in the risk business and will always make money in the grand scheme of things. It is the taxpayer that ends up getting screwed.

Ultimately, it is the responsibility of the consumer to spend within their means. One of the biggest downfalls and risks to this countries well being/security is our debt (over) load.

Don't blame the bank when you are underwater, lose your income, or when your ARM expires and your payment increases to the point you can't afford it anymore. The blame for this falls squarely on the consumer when this happens and the cost is passed on to those of us who were not irresponsible.

You are correct, but many listen to bankers and mortgage lenders like it's gospel. By golly, if they say I can afford X amount, then it must be true. Others are way too concerned about keeping up with the Joneses and this is what you're talking about. Mortgage lenders will push an ARM when the buyer is on shaky ground. Again, the buyer is trusting that the lender is doing what's best for them.

Any time you have someone generating income from putting someone else in debt is a bad thing.

The rules need to change. The maximum percentage must be lowered to realistic numbers to insure that your mortgage is really obtainable. I believe that when I first got married and bought my very first house, they said I could qualify for a mortgage that was 33% of my GROSS income. For the average couple, that's not realistic. We discussed it and capped it at 20%. Sure that meant a smaller house, but we never had any problems making our monthly payment.

The system is broken and I just don't see the banks or the government willing to really fix it. The consumer is either too dumb or starry eyed to know the truth.

protegeV · Mar 20, 2017

j_h_smith said:
You are correct, but many listen to bankers and mortgage lenders like it's gospel. By golly, if they say I can afford X amount, then it must be true. Others are way too concerned about keeping up with the Joneses and this is what you're talking about. Mortgage lenders will push an ARM when the buyer is on shaky ground. Again, the buyer is trusting that the lender is doing what's best for them.

Any time you have someone generating income from putting someone else in debt is a bad thing.

The rules need to change. The maximum percentage must be lowered to realistic numbers to insure that your mortgage is really obtainable. I believe that when I first got married and bought my very first house, they said I could qualify for a mortgage that was 33% of my GROSS income. For the average couple, that's not realistic. We discussed it and capped it at 20%. Sure that meant a smaller house, but we never had any problems making our monthly payment.

The system is broken and I just don't see the banks or the government willing to really fix it. The consumer is either too dumb or starry eyed to know the truth.

Good number. 20% is our cap as well. Though, like I said, some banks will try to tell you that number is in the 40s. :facepalm:

protegeV · Mar 20, 2017

TheBert said:
The guy asked the purpose of an ARM loan and I told him what the purpose of an ARM loan is, I did not encourage anyone to buy beyond their means.

I lost money on the first house I bought. I paid more for it than I was able to sell it for after I had owned it for 7 years. Was I mad, no, was I upset with the banking industry, no. I did immediately buy another house.

I wasn't really asking the purpose of an ARM. Rather, I was asking him why he HAD TO use an ARM as he stated. I would assume that the reasoning is probably hand in hand with your explanation. He found a property he really wanted and the only way he could afford it was with an ARM.

Mike · Mar 20, 2017

Is the lending industry still doing 80-10-10 loans; 80% conventional mortgage, 10% cash down, 10% equity loan? Those seem like a recipe for trouble IMO.

j_h_smith · Mar 20, 2017

Mike said:
Is the lending industry still doing 80-10-10 loans; 80% conventional mortgage, 10% cash down, 10% equity loan? Those seem like a recipe for trouble IMO.

I don't know, but in my opinion, any time a lender will let you pull money out of your house on a refinance, it's trouble. I'm sure others will post that it's okay. But for me, I'd never pull equity out of a house. Just my personal opinion. I'm sure there's many reasons you could or should.

Melnic · Mar 20, 2017

protegeV said:
I'm shocked what the bank thinks we can afford.
We sat down and determined what we wanted to spend and the max we would stretch for the "perfect" place. And by stretch, I mean still well within our means. The number the bank gave me was 25% higher than our highest number. There's no way I would spend that...

Look at your future potential income and what you want to spend/save. My wife and I are professionals/managers so everyone's situation can be different. When I was younger and my income was rising, we purchased a small townhouse even though we could qualify for a single family home. My income was rising steadily and what I thought was "pushing it" for a home payment turned out to not be so in the next 2 years. We moved out in 6 years total and stepped up during a home slump (good time to buy up).
I've talked to many people who found they were moving up every 6 years and regretted not pushing it in the first couple years. Moving too often costs you dearly.

Everyone's situation is different and if you budgeted $$ for toys and vacations and kids stuff, the banks don't calculate what your habits are and if you don't want to break them. Maybe you want to retire early and your socking away $$ for that, Bank does not know or care, they just give you a Max $ based on formulas. Loosing your job and having a $2000 house note or $2300 house note does not really make something bad anything other than bad... Me, I plan for good things but prepare for bad things. Mostly good things happen to me though

I'm in the middle of moving up to a bigger home. My wife's business payments stop Oct 2018. I can deal with tight cashflow for the next year and push my limits even though I'm already maxing out my 401K and are already sitting well with retirement plan and other investments. Planning starts when your young and I wish I'd even started earlier than I did.

protegeV · Mar 20, 2017

Melnic said:
Look at your future potential income and what you want to spend/save. My wife and I are professionals/managers so everyone's situation can be different. When I was younger and my income was rising, we purchased a small townhouse even though we could qualify for a single family home. My income was rising steadily and what I thought was "pushing it" for a home payment turned out to not be so in the next 2 years. We moved out in 6 years total and stepped up during a home slump (good time to buy up).
I've talked to many people who found they were moving up every 6 years and regretted not pushing it in the first couple years. Moving too often costs you dearly.

Everyone's situation is different and if you budgeted $$ for toys and vacations and kids stuff, the banks don't calculate what your habits are and if you don't want to break them. Maybe you want to retire early and your socking away $$ for that, Bank does not know or care, they just give you a Max $ based on formulas. Loosing your job and having a $2000 house note or $2300 house note does not really make something bad anything other than bad... Me, I plan for good things but prepare for bad things. Mostly good things happen to me though

I'm in the middle of moving up to a bigger home. My wife's business payments stop Oct 2018. I can deal with tight cashflow for the next year and push my limits even though I'm already maxing out my 401K and are already sitting well with retirement plan and other investments. Planning starts when your young and I wish I'd even started earlier than I did.

We went conservative on our last house in MD. Kids are getting bigger and the next house purchase is most likely gonna be the one we stay in for at least the next 15+ years. That being said, we can afford what we want. Anything more would be pretentious.

TheBert · Mar 20, 2017

Mike said:
Is the lending industry still doing 80-10-10 loans; 80% conventional mortgage, 10% cash down, 10% equity loan? Those seem like a recipe for trouble IMO.

When we bought our second home, after selling the first, we used an 80-10-10 loan, 80% first mortgage, 10% second mortgage (same lender) and 10% down payment. We had income but, we lacked liquid funds at the time. Within 3 years we refinanced into an less than 80% loan to value ratio due to the home having appreciated. We could have afforded to keep our old house and buy our new house with the income we had at the time. My wife and I did not want to be landlords and decided to sell the old house.

Alan3413 · Mar 20, 2017

If you're just starting out and buying your first home, consider also how your earning potential will go up over the years. So what may be steep initially will get easier as your earning power rises. As with other financial endeavors, this needs to be balanced against your tolerance for risk.

TheBert · Mar 20, 2017

j_h_smith said:
I don't know, but in my opinion, any time a lender will let you pull money out of your house on a refinance, it's trouble. I'm sure others will post that it's okay. But for me, I'd never pull equity out of a house. Just my personal opinion. I'm sure there's many reasons you could or should.

We refinanced, for the third time, a couple of years ago. I was able to lower my interest rate, take $45K out in cash, to enable us to remodel the 30 year old kitchen, and reduce my monthly payment by about $300 per month. I don't plan on being in this house forever, MoCo is too damn expensive to retire here and due to the policies of the county government it is turning into a cesspool of Latin American gangs.

Bertfish · Mar 22, 2017

protegeV said:
Just curious, why did you HAVE to do an ARM?

We're house hunting down in TX and I'm trying to find the balance between buying now while rates are low or later when rates go up and the sellers market cools off.

Long story short...

Realtor was my girlfriend's Dad. I was buying a house which there was no way in hell I would get a traditional mortgage on due to a multitude of condition issues. Found a small local bank who was interested in earning said girlfriend's Dad's business. Loan officer talked with their underwriter and convinced them to give a mortgage on the house even with its issues since I was buying it so far under market value (appraisal came in $75k over what I paid without me lifting a finger). Caveat was they wanted me to take an ARM; no idea why but whatever. So I refinance before the 5 year mark is up and GTFO of the ARM. I'll refi into another 30 year mortgage but pay it like its a 15 year mortgage to get it gone faster.

El_flasko · Mar 23, 2017

Bertfish said:
I know the rate hikes indicate a healthier economy but they could not come at a worse time for me.

Bought my place in November of 2015, I think I'm at 3.75% or 4%. Had to take a damn ARM, though, which kicks in after 5 years. Figured I would refinance before the 5 year fixed rate window closed which is still a reality for me. With the rates going up though I feel like a refinance will actually cost me.

Call me bud, we can look at it from all angles and see if it makes sense or not.

El_flasko · Mar 23, 2017

protegeV said:
I'm shocked what the bank thinks we can afford.

We sat down and determined what we wanted to spend and the max we would stretch for the "perfect" place. And by stretch, I mean still well within our means. The number the bank gave me was 25% higher than our highest number. There's no way I would spend that...

That's actually a common thing I see when I talk to potential buyers. They often qualify for a lot more than they think or even would want to buy. I tell them the payment drives the bus. Don't EVER put yourself in a position to be mortgage poor. Mortgage poor sucks.

El_flasko · Mar 23, 2017

Mike said:
Is the lending industry still doing 80-10-10 loans; 80% conventional mortgage, 10% cash down, 10% equity loan? Those seem like a recipe for trouble IMO.

Yes they are. Its sadly not too surprising this product or that is coming back. Banks/lenders need to tighten debt ratio requirements, credit score/analysis requirements, and ability to pay models. Just my opinion. There are credit unions out there now doing 100% loans. The real issue prior to market collapse (imho) was they were doing high ltv loans for LOW credit score borrowers AND letting them state income/assets. That was straight up BS insanity.

Not saying it's perfect now by any stretch, but it has gotten a little better.

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