So, in trying to determine a format for creatively writing about a semi "bearing" and highly discussed topic, I came to the thought that one of my favorite childhood book characters is a lot like most of my borrowers.  Therefore, I figured that she should perhaps take on a new mission - finding the loan that is "just right". 

I thought it would be fairly easy and cut and dry, but as the story progressed, I found myself more and more befuddled!  So, here is the story.  I am completely eager to hear what you all think of it, and if in the end you agreed with Goldilocks and her decision...

So, one morning, there was a very wide eyed blonde girl, whose name was Goldilocks.  As she went about her training for the Komen Race for the Cure, she happened upon a sweet little cottage for sale.  Now Goldilocks already had a nice home, and really did not need another one, but she had been tossing around a theoretical question in her mind.  Plus, she really did like it, and thought an investment property might not be such a bad idea.  So, Goldilocks, being a woman of great intelligence, phoned her mortgage broker, Sarah.  She figured that Sarah had done a great job for her in the past (yes, I am humble...), and that as such, she would have excellent words of wisdom on the topic.  To her dismay, however, Sarah's answers were not so simple.  Sensing Goldilocks' confusion, her mortgage broker sat her down at her laptop and plugged in a series of different things.

Goldilocks had been attempting to determine whether a fixed loan, an ARM loan, and/or an interest only loan would be the best option for this new potential investment property.  But, as with all decisions, things must be tried before a quality decision could be reached. 

So as they sat there and discussed the hundreds of options, Sarah showed Goldilocks what her payments would be if all three loan options were put into place.  Now, in fairness, the only way to do this was to compare porridge to porridge.  So, they looked at a purchase price of $300,000.00 on the home.  The mortgage broker, knowing that this would be an investment property, advised Goldilocks that putting a substantial amount of money down would bring the best rate.  Goldi decided to put down 30%, which brought the loan amount to $210,000.00.  The next discussion then ...would this property be used for quite some time, or was it going to be for the purpose of flipping?    Goldilocks told Sarah that her goal was to hold onto it, and maybe someday retire there.  The master suite was on the main floor, after all ~ and that felt "just right"! 

So, as she sat there watching the story unfold, she learned many things about the possibilities of her various loans ... and for the needs of Ms. Goldilocks, the answer became more clear.

If she utilized an ARM loan, it was just too big - too much of a risk.  Particularly because Goldilocks hoped to own that home for many years.  She just could not sit in it comfortably, feeling that her investment would be safe.  If the interest rates spiked up a few years later, there goes her safety zone.

If she opted to use the interest only option on either loan, Goldilocks would be concerned.  She believed that with property values being stagnant, she could even loose some of the money on her home.  She wanted to be paying on the principal, so that at her point of retirement, she would be free and clear.  That product proved to just be too dangerous for this particular circumstance.

Being as Goldilocks wanted to feel secure and comfortable, she thought she would try checking out the fixed rate loans which were available.  Right away, she knew that it was "just right" for her. Her little investment cottage in the woods would continue to appreciate, she would carry on paying her principal down, and the terms would stay the same for the next 359 months.  No surprises ... At least not until she spent some time there in the summer.  She had taken her mortgage broker up for a "Thank you" picnic lunch near the cottage.  When they returned back to Goldilocks' home, they noticed that there was a broken chair, one glass of wine gone, and one cuddly little...dog named Bear sleeping in her bed.  It looked "just right" after all!  

The lesson in this story is that there is no real answer.  Different loans suit different people at different times.  It is up to you and me to establish what they want it for.  Not just to buy the house, but to help anticipate their expectations.  To know and to understand their hopes and plans ~ that is how we decided which is best.  They each have their place, and they each have a strong purpose.  As a consumer, do listen to all of the facts; take the time to try out each scenario.  Not just the monthly numbers.  You may live to regret that day.  Get a great referral, and then spend time telling them what your hopes are.  Together with your loan officer, you really will find what is "just right!"