Was the Mortgage a Mistake?

This is the actually the headline from an article on the front page of the Business section in this past Sunday’s Washington Post. In the wake of the “Credit Crisis”, a couple was discussing their regrets and fears about their adjustable rate mortgage. Their chief concern is will they be able to afford their home once their rate adjusts or will there be loans and programs available to refinance when the time comes. Honestly they share the same fears and worries of many borrowers who purchased homes in the last couple of years with adjustable rate mortgages. Are you starting to worry as well? If not maybe should.

First let’s examine the problem. According to the media, all the issues of the “imploding mortgage market” were caused by mortgage lenders and bankers such as me. Quite frankly we all played apart in this disastrous market; lenders, realtors, and borrowers alike. Realtors listed properties at astronomically high prices causing bidding wars for hot properties. In some cases, sellers had not owned the property even a year and were able to buy and then sell for high dollar profits. They were happy and Realtors too as they skipped to the bank with “fat” commission checks from the higher than “listed” sales prices. As mortgage lenders, we placed a great deal of our clients in Adjustable Rate Mortgages without any regard for the future market. Just as the Realtors many mortgage lenders and brokers benefited handsomely from these shorter period loans with no regard for the clients financial future. I believe myself to be one of the responsible lenders not out to overcharge clients with excessive points and fees but I too am guilty of placing at the least three out every five clients in an ARM. Let’s not forget the buyers who’s only question was,” What is the lowest payment I can get?” so I can afford this overpriced home. So even when trying to be a trusted advisor and present more than one option for mortgage financing inevitably most chose the lower payment adjustable rate programs versus the more stable, higher payment fixed rate options they were given.

Well none of us can cry over spilled milk. So instead of asking, “Was the Mortgage a Mistake?” it is time to review your current situation and figure out where we go from here. Which the couple mentioned in the Washington Post attempted to do by calling there financial planner. Noticed I mentioned attempted because the correct thing to do now is to call your local and accountable Mortgage Lender to schedule a review of your current financing situation. And maybe consider that fixed rate loan before it is too late. The initial discomfort of the possible payment increase will be much less painful than the discomfort of losing your home to foreclosure or premature sale because you cannot afford the new payment when your rate has adjusted too high, credit scores have dropped, or the homes value has significantly decreased. Don’t leave your family’s future to chance with some unscrupulous mortgage lender.

And buyers as well don’t get caught in the future asking “Was the Mortgage a Mistake?” If cost per month is the determining factor, which it typically is for 99% of home purchasers, make sure you are pre-approved before buying and don’t review properties outside of your price range which can lead to that question, “How can I get the lowest payment for this house?” Basically it will be like starting our cycle of creative financing i.e. interest-only adjustable rate mortgages all over again. Or maybe not(which I will discuss why at a later date) as the credit crisis continues and people are left asking “Was the Mortgage a Mistake” and the answer is probably yes but it doesn’t have to be…..

Contact, Markita Aldridge-Woods, local and accountable Woodbridge, Virginia area lender at (703) 497-3936, email at markita@weststarmortgage.com or visit her site at www.TheLendingAdvisors.com so you don’t have to ask the question "Was the Mortgage A Mistake!"