Comments on: Option ARM Loans – If You Have One You Need to Read This

By: Bob

Bob — Sat, 27 Oct 2007 12:08:13 +0000

Thanks for the comments guys! As a Realtor I feel it’s my duty to advise and counsel about the entire home buying process, of which the mortgage is an important part. Option ARMs is one area where it looks like we all agree. They have their place for savvy buyers who can get better returns on their money, but should never be used by our clients to buy a home they otherwise could not afford.

By: www.getbestloansnow.info » Option ARM Loans - If You Have One You Need to Read This

Thu, 25 Oct 2007 02:58:20 +0000

[...] Bob created an interesting post today on Option ARM Loans – If You Have One You Need to Read This.Here’s a short outline:According to an article in the Wall Street Journal, Countrywide is about to face yet another crisis; this time it involves Option ARM loans. The best estimates are that the default rate has more than doubled for these types of loans … [...]

By: Andy Holloman

Andy Holloman — Wed, 24 Oct 2007 18:58:36 +0000

Hi Bob – I think you did a great job in pointing out the complications with these types of loans. This loan product is not necessarily any better or worse than others, it is just more complex. Hopefully, anyone who took out an Option ARM had a loan officer that educated them about the loan and about negative amortization. Sophisticated borrowers can find this type of loan advantageous as can people who may have flucuations in their income due to self-employment or commission based work. All-in-all, these types of loans simply require a knowledgeable mortgage professional, as does any other type of mortgage decision. Thanks! Andy Holloman, 919-459-1316

By: Clearwater Beach Real Estate

Clearwater Beach Real Estate — Wed, 24 Oct 2007 17:06:44 +0000

Bob – I have seen people really find themselves spinning out of control with these types of home loans – great article – hope it helps others skip it all together and the rest run to refinance. – Cyndee Haydon

By: Tom Deadmore

Tom Deadmore — Wed, 24 Oct 2007 13:25:35 +0000

Bob-Another great article here. I am a lender and I have seen very few people in OUR market utilize this product. You briefly alluded to Florida and California and the rapid appreciation properties there experienced. Those two markets were a HUGE source of Option ARM originations. This CAN be an excellent product for the DISCIPLINED borrower that takes the savings on payment and invests that difference somewhere else. The goal here is to get a greater return on the investment than the interest that is accruing on the back end of your loan. That way, you have a lump sum of money to pay off this interest at a later date and you have made additional monies on your investment. Many people use this to grow their wealth.

Many people chose this product for a different reason. Many borrowers chose this product for a different reason. They live in the areas that WERE rapidly appreciating and saw this product as an opportunity to afford the home of their dreams. The market was booming and everyone was feeling good. Mr. and Mrs. borrower felt that they could finally afford their dream home and the market would support their loan choice.

Hindsight is 20/20 and we now see that this was not a good choice for the folks that wanted to use this to just afford a home.

As with any investment choice, there are risks involved. Always remember to speak with a mortgage professional to assist you in your investment choice. The CHEAPEST payment is NOT always the best choice. A true mortgage professional will review your current as well as future financial goals and tailor a program to help you achieve them.