My next mortgage

I was looking through another thread for mortgage info and came across this:

In the same thread Freakshow was working on a 5 yr I/O @ 5.25%.

That was 6 months ago. I started to bump the thread but just figured I'd start another one.

Can you still get I/O loans like these?

 

You can still get I/O loans for all kinds of time periods, yes.

 

Been running the numbers for a 10 year I/O. I was just wondering how much standards had tightened since we refinanced a few years back. Documenting income is not a problem.

 

Standards have tightened, but if you can document your income, you should be fine. Your area is going to be a bit of a problem though.

 

Declining neighborhood/zip code status?

Hmmm... I can't imagine it would be much better in Martinsburg/Winchester/Hagerstown then. That's where we are looking and the market is pretty much in free fall right there right now. So, that might be a problem.

We aren't looking to move til next year though. So, I have that going for me. Maybe I can caddy a few extra rounds between now and then.

 

Tehy'll do the analysis at the zipcode level, so you might be OK. But even impacts close to you are going to affect you some I think because of the danger of spillover. The whole DC market is on the shit list right now I think.

 

It is.

http://www.baltimoresun.com/business/realestate/bal-te.bz.sales10feb10,0,2992000,full.story

"Borrowers who want a house in a pocket of strength are in a better position to get the down payment option they want, lenders and brokers say. Buyers will likely need to pony up more money, regardless of the lender, if the appraisal for the home they want includes the words "declining values," "extended marketing times" or "oversupply," said David Stevens, who runs Long & Foster Cos.'s affiliated mortgage, title and insurance businesses.

In general, Stevens suggests, Baltimore-area buyers should be prepared to put down 5 percent to 10 percent. An exception: loans insured by the Federal Housing Administration. FHA accepts 3 percent down and isn't requiring more in declining markets. FHA's loan limit of $362,790 is too low for some homebuyers, but new legislation will raise the ceiling."
----------

In our case, we were first looking to swap the townhouse for a single family home. Then I saw how cheap we could go if we just traded townhouses. THEN I wondered how low I could get the payment if we went I/O. There's no way I am gonna be in another TH for 10 years.

And doing the I/O gets the payment low enough to where I could have about as much equity in the house after 10 years just by putting the difference in payments in a coffee can under the bed.

 

I was just musing today about how goofy I am for thinking that this loan may be my most favorite purchase ever.

 

I don't see how it can be beat as long as I don't get stupid and use it to stretch myself into too much house.

But to use it to see how far I can push the payment down on something I can already afford? Oh yeah. I'm there.

I'm looking for the down side.

 

1) Your property depreciates.

2) You stay at the residence, and after your loan adjusts from being an awesome low cost product into a strangling product with a much higher rate you're forced to move.

3) The combination of the above.

I'm safe from #1. There's still a good chance I'll be here in 7.5 years when mine clicks, so depending on what happens between now and then determines, in the end, how good the thing was.

The best case scenario is I can re-up for close to the same rate. Worst case is my rate goes way up, my income has not gone up, and it makes more sense to sell than to stay for 50% more money.