For many people an option ARM really is the best choice. The Key is to explain it right. Perhaps this case study will help. I have a client a single mom with 2 children. She managed to save small down payment and decided to but a house. The problem is how much house could she afford. At the time she bought her house she could only afford about $700 a Month PITI. We managed to get her into a $120,000 house with 10% Down. Her Mortgage payment on a 5 Year Option ARM was only $440 a month for the first 5 Years leaving her $260 a Month for Tax and Insurance. At the time she bought her house 2 years ago she was thrilled to get the loan. I ran into her recently and asked her how things were going she said she was a little disappointed in her loan because she now actually owed more on her house then when she got the loan a little over 2 years ago, I said to her let's set up a half hour appointment where we can talk it over and see how we can solve the problem. We got together a week later and discovered in 2 years the amount she owed (her principal) increased by less then $2,000 yet her house appreciated in value over $15,000 based on recent comps in her area. An unrealized gain of over $13,000. I said to her what is better to be a renter and pay your Landlords mortgage or be an owner and pay your own mortgage. I further explained to her how each month she has We looked at some refinance options but she decided to keep the loan she had because it did give her 4 payment options each month - minimum payment,
- Interest only payment,
- 30 year payment
- 15 year payment.
A lesson I learned from this is even if I think a customer understands the loan at closing it is always best to follow up every few months. I turned an upset customer into a happy customer and got a referral out of it, I am now following up with all my option arm customers. |
