I Feel Good or How I Learned to Stop Worrying and Love my Fixed-Rate Mortgage

By
Mortgage and Lending with Infinity Home Mortgage

     When it comes to fixed vs. adjustable rate mortgages, there really is no question as fixed-rate mortgages are the way to go! Opponents of this position will argue all the finer points of their ARM products and how the v buyer can more greatly benefit from them. That may even be a valid argument for a minuscule percentage of their clients but the vast majority of that clientele would be better suited to a fixed-rate product.

     Holden Lewis of Bankrate.com reported recently that, of the 8.4 million ARM's originated between 2004-2006, 1.1 million of them will default due to payment shock from resetting. As a side note, fixed rate mortgages do not reset. Mr. Lewis also went on to report that 1 in 8 sub-prime ARM's will default due to resetting and, even more disturbing, that 1 in 3 ARM's originated between 2004-2006 with a teaser rate of less than 4% will default due to resetting. The latter aren't sub-prime borrowers with questionable credit and spending habits. They are prime borrowers with impeccable credit who are in mortgages they often don't understand.

     The crux of my argument isn't even the numbers, which are staggering. It is simply "Peace of Mind". The American Dream is hard enough to achieve nowadays without the worry of your mortgage turning upside down. The war on terror, rising gas prices, the music of Nickelback...these are the horrors that the average person has to deal with constantly! This isn't even counting the day to day hardships. People need to know that, despite all of this, they can go home to their families, that they have at least that.

     Qualifying potential homebuyers on a 30 year fixed-rate payment and making sure that payment works for them is responsible lending. Being confident and certain that you can afford to make the 30 year fixed-rate payment is responsible borrowing. We all could have used a lot of both in the last several years.

     The final point for fixed over ARM is this: Look at what the market is doing. Many lenders have done away with their 2/28 and 3/27 products. Moving forward, both lenders and borrowers are going to be looking for fixed-rate mortgages. The ARM will have gone the way of the Dodo. Too bad it's going to take more than a million foreclosures until it finally happened.

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Ambassador
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Billy Boy, I know you had to write this in a hurry, but I really hope you start posting more man.  You have a knack, you have a flare, all you need is an editor and Post Stager, then again, so do I.  Nice stuff here man and I absolutely loved, "The war on terror, rising gas prices, the music of Nickelback...these are the horrors that the average person has to deal with constantly!"  LMAO, I agree on all accounts!

Jul 27, 2007 08:25 AM #1
Rainer
229,296
Sarah Cooper
Real Estate Shows - Hurricane, WV

I happen to love Nickelback.  I won't hold that against you, you did make me laugh.  You and Sardi can talk about my lack of taste behind my back, it's OK.  :o)

You do have a knack, he's right. 

Jul 27, 2007 08:58 AM #2
Rainer
75,626
Ann Guy
NA - Allentown, PA

One important thing that many of us have forgotten during the 'housing boom'--different products are for different people.  Not everyoue should get the same thing.  The sub-prine 2/28 100%....everyone wanted it rather then the fixed rate.  Houses were supposed to continne to appreciate rapidly, credit was supposed to get repaired, customers were supposed to stay healthy and keep their jobs....

That darn crystal ball didn't work again.....

Jul 27, 2007 08:59 AM #3
Rainer
83,422
Rey Gallegos
Supreme Lending (NMLS ID #2129) - Las Vegas, NV
FHA, VA, Home Loans Las Vegas, NV
I would be interested to see what everyones posts looked like three years ago.  Very descriptive.
Jul 27, 2007 09:56 AM #4
Rainer
168,035
Matthew J Blum - (retired from the business)
Palm Beach Gardens, FL

Bill,  nice post.. Don't really agree with everything because I believe something different but you can also only lead a horse to water..you know...

Rey...I agree 1000%

Jul 27, 2007 10:33 AM #5
Rainer
71,002
Thomas Weiss
Thomas R. Weiss - West Palm Beach, FL

Bill,

Good job, it's hard to write a post when there is so much that can be said about a product , but you did it well..

Tom Weiss

Jul 27, 2007 11:28 AM #6
Rainer
33,323
SHAUN WREN
LICENSE IS NOT PLACED - Lakeland, FL
Bill-I guess I am more conservative like you. With the market moving up 15 times in the last 2 years would tell me that an arm in the last two years wouldn't be a good idea. Besides what will keep the rates from continuing to rise?
Jul 27, 2007 02:38 PM #7
Ambassador
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Bill, you make a very good argument for the Fixed Rate Mortgage, and backed it up with statistics and not just opinion.
Jul 27, 2007 03:11 PM #8
Rainmaker
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Robert D. Ashby
Visual Approach Aerial Photography (Visual Approach Photography) - Plantation, FL
Turning Visions into Photographs (and Videos)

Bill...Nice post.  I do not agree in its entirety, especially quoting Bankrate.com, but that is a different issue.  You did a good job stating your opinion and backed it up.

Note to Shaun...What will keep rates from falling in the future?  Seeing as everything is cyclical, rates could be falling again 5 years from now, not necessarily going up.  Just a thought.

Jul 28, 2007 05:51 AM #9
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Bill.... I will agree with a few that you did state your position and backed it up. But I will also have to disagree on several points. One is that I am reading so many that talk about the 2/28's & the 3/27's.  That was mainly subprime and did have a lot of impact. What so many fail to be specific on and educate all of us on is the margin and index of these so-called arms. This also plays a large roll on how rates move. Anyhow, not here to lecture. It's the peace of mind that still get many in trouble. It's goals and having a strategic plan that is important. And a loan officer that can help with this plan.  And not just based on what the market is doing now, but understanding and knowing past history is so key.

The 2nd part was also quoting Bank Rate.com. I agree with Robert that it's a different issue. Just be careful in endorsing a forum and site as this one. Take a full peak at what this site offers, what it shows the consumer, and who is on there... what's on there... and that it's more of an advertising menu.

In any case....What you wrote to have a good flow to it.   And I do welcome you to Active Rain and I hope I wasn't harsh. These were just my opinions. 

Jul 28, 2007 09:27 PM #10
Rainer
229,296
Sarah Cooper
Real Estate Shows - Hurricane, WV
Oh, Bill?  I offer editing and post staging at very reasonable rates.  ;o)
Jul 29, 2007 05:34 AM #11
Rainer
33,323
SHAUN WREN
LICENSE IS NOT PLACED - Lakeland, FL
Robert- What my concern is at this stage in the game is that Rates are going up. And as you state they are cyclical and rates could be falling in the next 5 years. That would tell be that the rates could increase for the next 5 years Then even if the started to decrease at the same rate, That would mean that over the next 10 years you would pay way more than you would if it was fixed. If it was 5 years in the future, I would recommend an adjustable, due to the rate falling. Thus the opposite scenario. It is a gamble either way and we must first find out how the customer would like to benefit from their payment strategy. I am just like you trying to look out for the bes interest of my customer. What might be good for one customer may not help the next.
Jul 29, 2007 01:10 PM #12
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Bill Engleman

Schuylkill and Carbon Countynulls FHA & USDA Specialist
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