A Realtor stands up during a networking event and introduces herself. Then, just before she sits down she adds, “And, there are still 100% financing loans available out there.” Smiles and sits down.
Ugh! (that’s my stomach dropping to my feet). Have we not learned anything from the past several years? Has this massive countrywide housing fiasco not taught us a thing? Who in their right mind would take out an interest only, 100% financing loan on a home these days? Unless you are an investor looking to unload the house quickly and at a carefully calculated profit, I cannot see a value in this type of loan for the average homebuyer. And, then to promote it widely and broadly as this I find highly irresponsible coming from a professional.
Interest rates are low right now, but we know they won’t stay that way. So, what happens to the homeowner when their interest only loan adjusts in 3 to 5 years when interest rates have risen? In San Diego, where I am, housing prices are still on the decline or flat right now. All market stats point to a buyer’s market. This is not a market I would recommend a home buyer jump into with an interest only loan.
Other low cost options are available, especially to first time homebuyers. Even with the potential decrease in FHA conforming loan limits at the end of the month, a home buyer can get into a starter single family home in many of the areas in San Diego with a 3.5% down payment. In addition, the county, city and state all have first time home buyer programs that help with closing costs, offer silent second’s and other assistance.
So, with all of these options available to new home buyers, can we please help our clients and the public by not perpetuating old habits?
Rant over.
Image credit: Clip art licensed from the Clip Art Gallery on DiscoverySchool.com
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