As many more buyers start to come out into the market, a common question I get is the type of financing that they should pursue.
Let me preface this by sharing with you an astounding fact: In 24 years of selling real estate, not one of my buyers that I have helped purchase a home have lost their home because I steered them in the wrong direction in terms of risky loans or short term rates. The buyers that chose the 5 year fixed rate loans did so on their own despite my "words of wisdom" of the security of long term fixed rates. When I performed mortgage services for a while, only 2 of my clients went into a Neg-Am loan and that is because despite my advice not to get a Neg-Am, it was what they wanted to do. Hey, you can lead a horse to water, but you can't make them drink it.
The reason why I say the above is because in 24 years I have sold a lot of homes. A lot. What has always been consistent is my advice to my home buyers and all home buyers of not going for the short term fixed rates that may seem attractive because they are many times a little lower than the 15-30 year fixed rate loans. Short term rates and Neg-Am loans in my opinion are a ticking time bomb and one of the reasons why we are in this mortgage crisis today.
With rates being as low as they are right now, why would you not opt for a 30 year fixed rate fully amortized loan? Heck, if you can afford a 15 year fixed rate that is fully amortized, do it. Your payment may be a little higher but more of your monthly payment goes towards principle and your interest rate is usually about .25% lower then a 30 year fixed rate loan. But only do it if you can afford a 15 year fixed rate.
This market has us all going back to the basics and back in the day, there really was only 15 and 30 year fixed rate loans and less people lost their homes by going the conservative route. Think we could learn something from our parents? I think so!
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