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hmm...I agree maybe an interest only option is not the best idea for her and her husband, but then again, I have no idea what she told her loan officer. Maybe you could convince her to talk to 2 or 3 loan officers from different banks or companies to make sure she has all her options. I totally agree with you, those cosing fees sound really high. Yes, lenders who lend in Fl do have caps and that cap of 10.5 is pretty good from a mortgage stand point, it can be well over 13%. Granted she needs out of that loan before it gets there. If she was qualified for a below prime rate, she must have good credit and DTI. Prime is at 8.25% and you said she got 7.95%, you have to have good credit and DTI to get below prime mortgages.
I think this country got really used to the 5.00% and below prime rate for the long time it was, you have to remember in the late 80's prime rate was over 10%. Yes Fl is a tough market right now with the hugely inflated housing market, shoot, I sold my house in Jupiter Fl in 97' for 75K If I held on to it till this past year I could have sold it for 225k!!!!! That is crazy!!!
I honestly don't know how the older folks with fixed income can make it there anymore and I know a lot have to stay, they can't sell there houses and their Dr's are there and all that. Add in the raising property taxes and insurance, IF you can get it! It is just an insane housing situation there. I agree.
I have to agree w/ mbmouse that these types of loans, ARMS/interest only, etc can be VERY profitable to the RIGHT person. We had such on our current house. We purchased it in 2002 and we investigated it heavily because I had a fear of the ARM's from back in the 80's . We have a VERY good mortgage broker that we have used for every purchase that my mother deals with (she is a realtor) and he knows that if he screwed us up he would lose business. He has never steered us wrong and I don't know how many times he had to explain the whole deal to both of us. Right after we bought our home there was a whole write-up in the local business section how these loans can be very good for those that have the income but do not want to tie up all of their cash and do not plan on selling in the next 5 years. We fell into that catagory (we are here to stay as we like to say, the only time we are leaving is going to be covered w/ a sheet on a stretcher, lol). We have the assets to back up the house and we put down a sizeable chunk. mbmouse described the loan we had, it had a cap on it and every year I would still call our mortgage broker and the bank holding the note and ask about fixed rates to refinance. Every time both would come back saying for us to stay right where we were because the rate that the cap was set at was still lower than they could get. When things did drop last year we did refi but for a shorter time period than the typical 30 years. We were not hurt at all and it would not have bothered us one bit if the market did fall because we have no plans of selling. By the time we would be ready to sell the market should have recovered and we would still come out ahead.
Now, I do agree that these types of loans are NOT for those trying to qualify for more house than they really should. That is where those people get into trouble. But I am glad that different loans are available because not everyones financial situation is the same. Having done what we did allowed us to put more capital into other ventures that actually helped our situation instead of tying it all up on one house or financial interest.
As for the foreclosures and the rise in them. Lately there has been much talk about the high rate of foreclosures in the Dallas area (Dallas and Collin Counties). There are many factors to why this is occuring. One is the job market and those that really stretched too far to qualify for more than they could sustain if one lost their job. The other contributing factor has been the schemes that have been going on that are legal but not on the up and up. One such is the selling of a persons good credit to get a person/buyer into a house that has bad credit. This is also done to artificially inflate a market. Right now there is a huge investigation going on in Frisco, Tx about someone that has done this on several townhomes in a new development. A lot of these properties end up in foreclosures and it was not because of a family that lost a job or such. These types of people go into markets that are on the steady incline and try to make a quick buck and then they are gone.
Will the bubble burst here in my area. No. We did not see the huge increases that were totally insane that happened in other parts of the country. Over the last 20 years the Dallas market has had a few dips but the rises have not been so drastic to cause a severe downturn if something should "crash". What I have seen hurt our real estate market that is happening in an area close to me is unscrupulous realtors (and my mom is a realtor and does not like the practice). In order to make themselves look good by selling their listings w/in a very short time perios they list the property for less than it really should be. Then the next listing ends up being even lower in that area. The buyers start to see this "artificial" decline and then are hesitant to buy or they want to wait for the next "price reduction" sign to go up. For every house that sells for less than what it really should the next one has trouble appraising for a more accurate sales price. Unless the buyer pays cash for the difference. This practice needs to stop too.
Hot areas of Southern California have gotten much hotter in the last few years. The $2,000,000 house was somewhere near Venice Beach. Most of the beach areas near Santa Monica have gone up astronomically over the last few years. Ditto with areas like Pasadena and Burbank.
The reason why prices have increased so much is because these areas are "close in" and they are nice areas. In other words, they are close to business centers like downtown and Santa Monica/Beverly Hills. A lot of people like to live close to where they work.
It still doesn't mean that these prices will hold long term. The fact is, most people don't make enough to buy these houses.
Santa Monica was #1 on the Forbes list of highest priced zipcodes for housing. It's hard to find anything for under a million dollars in Santa Monica -- and we aren't talking big mansions either.
Prices have gone up because of low interest rates and crazy creative financing. California has always had great weather, making it desirable to live there.....this is nothing new. And beach communities have always been more expensive. Even so, these prices are outrageous and not sustainable.
I agree with momof2 and others who have pointed out that RE market is local and the areas that are seeing a downturn are the ones where the house prices rose to a point that is unsustainable. I sold a vacation house in Ga this summer in one month for a healthy profit. My sister sold her house in La this past month after only being on the market for 2.5 weeks. A house down the street from me (in AL) sold last month before the sign could be put in the yard. That particular house was the first to be on the market in my neighborhood in the last 6 months. So all the gloom and doomers need to get a grip and realize that RE is doing just fine outside of FL, CA, and NY.
I agree with momof2 and others who have pointed out that RE market is local and the areas that are seeing a downturn are the ones where the house prices rose to a point that is unsustainable. I sold a vacation house in Ga this summer in one month for a healthy profit. My sister sold her house in La this past month after only being on the market for 2.5 weeks. A house down the street from me (in AL) sold last month before the sign could be put in the yard. That particular house was the first to be on the market in my neighborhood in the last 6 months. So all the gloom and doomers need to get a grip and realize that RE is doing just fine outside of FL, CA, and NY.
There is truth to the claim that some markets are doing better, such as Louisiana marysally, but the fact remains the housing market is crashing nationally, not just Florida, California, or New York. It doesn't take much investigating to figure it out as prices nationally are falling, not rising, for the first time since 1933. Of course, the Ostrich Syndrome is attractive, just not very practical in the real world.
There is truth to the claim that some markets are doing better, such as Louisiana marysally, but the fact remains the housing market is crashing nationally, not just Florida, California, or New York. It doesn't take much investigating to figure it out as prices nationally are falling, not rising, for the first time since 1933. Of course, the Ostrich Syndrome is attractive, just not very practical in the real world.
Hmmm.....Housing values still on the nice steady rise here in TN, I hear the same about most of VA, KY, NC, and most of this part of the country. Showing anywhere from a 3% to 7% value increase this year. Then again, not talking about "hot markets", where they are seeing a huge growth spurt this year, like Nashville and Charlotte.
I have never been accused of being an ostrich -- in fact I have been such a follower of RE trends that one of my coworkers felt that I should go into RE as a profession. That being said maybe I overstated by singling out the 3 states that have been hit the hardest. However, I think there are a lot of places where the RE is doing just fine. I named 3 (La, Ga, and Al) but I could have also named Tn and Tx, both of which I am familiar. With a little bit of investigation I could probably also have mentioned N and S Carolina as well as possibly Ms. The point is that the southern states have not seen the price runup and are still very affordable. They also benefit from a mild climate and in general a healthy economy. I don't see any of these conditions changing in the near future.
I think what blows me away is the kind of thing like the one house I posted above. It went from $230K in 1995 to $2,490,000 in 2006. That's 11 years and a gain of 983%. Even if the price of this house fell 50%, it would still be unreal. Keep in mind, this is NOT beach front property.
I don't think the question is "Are house prices going to fall?" I think the question is: "How far are house prices going to fall?" In some areas, I don't think it is unrealistic to imagine price decreases greater than 50%.
Also, many people in boom areas, like California, used their "liberated equity" to purchase multiple properties in other areas. What is going to happen with the "cash cow"/Housing ATM shuts off?
I think what blows me away is the kind of thing like the one house I posted above. It went from $230K in 1995 to $2,490,000 in 2006. That's 11 years and a gain of 983%. Even if the price of this house fell 50%, it would still be unreal. Keep in mind, this is NOT beach front property.
I don't think the question is "Are house prices going to fall?" I think the question is: "How far are house prices going to fall?" In some areas, I don't think it is unrealistic to imagine price decreases greater than 50%.
Also, many people in boom areas, like California, used their "liberated equity" to purchase multiple properties in other areas. What is going to happen with the "cash cow"/Housing ATM shuts off?
Are you sure? My dad wanted to settle down in CA back in 1980 and houses back then were $250k! A $230k house in CA in 1995 must be a tiny old house in a lesser neighboorhood. Sorry, but I dont believe you(yet) I am sure there is more to the story
Are you sure? My dad wanted to settle down in CA back in 1980 and houses back then were $250k! A $230k house in CA in 1995 must be a tiny old house in a lesser neighboorhood. Sorry, but I dont believe you(yet) I am sure there is more to the story
Southern California has had more than one recession in the past where house prices have fallen 50%. Your father could have had his eye on a house that was $250K when he wanted to buy it but only selling for $125K a few years later. Unfortunately, this "boom/bust" thing isn't a new thing around here. (Zillow doesn't go far enough back to cover the last boom period, the the $230K house I posted could have sold for $500K in 1989.)
Anyway, do some research! I'm not lying to you!
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. We have a VERY good mortgage broker that we have used for every purchase that my mother deals with (she is a realtor) and he knows that if he screwed us up he would lose business. He has never steered us wrong and I don't know how many times he had to explain the whole deal to both of us. Right after we bought our home there was a whole write-up in the local business section how these loans can be very good for those that have the income but do not want to tie up all of their cash and do not plan on selling in the next 5 years. We fell into that catagory (we are here to stay as we like to say, the only time we are leaving is going to be covered w/ a sheet on a stretcher, lol). We have the assets to back up the house and we put down a sizeable chunk. mbmouse described the loan we had, it had a cap on it and every year I would still call our mortgage broker and the bank holding the note and ask about fixed rates to refinance. Every time both would come back saying for us to stay right where we were because the rate that the cap was set at was still lower than they could get. When things did drop last year we did refi but for a shorter time period than the typical 30 years. We were not hurt at all and it would not have bothered us one bit if the market did fall because we have no plans of selling. By the time we would be ready to sell the market should have recovered and we would still come out ahead. 
