Economic News You Can Use -- Do You Have Angst?
OK, be honest. How many of you got talked into a loan you didn't understand or rushed into that “great” real estate deal that wasn't?. And now, in the cold, hard light of day, your remorseful longings make you rue the day you wrote that check or sighed those loan documents. "How could I have been so stupid," you ask yourself?
As your loan officer for life, I talk to you all every day and here is what I hear:
"They told me my payment was fixed and now I find out the loan is gonna adjust soon. I don't even know what rate I'm paying. How much can they go up? I don't want to lose my house or my investment."
"I took this loan because the monthly payment was much lower than any of the alternatives … The interest rate was only 1% because I qualified for a special program … I was led to believe that it would last for five years … I realize now that it didn't and that my loan balance has been going up every month … I am afraid that next year my payment is going to increase so much I won't be able to afford it … How do I get out of this mess? Do I have recourse against the loan officer (broker) who talked me into it?"
"The house I bought took much longer to rent … the negative cash flow was much greater because the loan payments are higher than what they told me ... I've got several others like this."
Whether you are a first-time home buyer or are further down the real estate wealth road with several investment properties, it's easy to make mistakes. I know well “the agony and ecstasy of real estate investing” because I have done it and, as a matter of fact, that will probably the title of my next book.
As my friend,financial reporter Jonathon Lasner, writes in his Orange County Register article "Borrower's Angst"?:
“After the public's burned by a trend or a product, the populace frequently acts wisely the second time around.
“Too many borrowers forgot the pitfalls of adjustable loans or hoped that perpetual house profits would bail them out. With plenty of tales out there about failed adjustable-mortgage strategies, I'm sure many loan shoppers today are thinking hard about a fixed-rate mortgage.”
I hate it when borrowers put themselves in jeopardy because they were mislead by a loan agent or real estate vendor who has no stake in their client's financial success. But don't worry; there is hope and opportunity as Lasner goes on to explain:
“Fixed mortgages are making a comeback here in California and nationwide. In Orange County home shoppers using fixed-rate financing to buy a home hit a 43-month high in March. But the last time fixed deals were so trendy was August 2003 -- just a few weeks after the Federal Reserve made its last cut in the rates it controls.”
So now many of you are learning the lessons I teach in my top rated book Real Estate Debt Can Make You Rich:
- Don't be seduced by low payments that do not reflect the true cost of your borrowed money.
- Know how the time value of money works.
- Double check and triple check the rents and loan payments of any property you buy.
- Buy-and-hold real estate investing is not a short-term strategy.
- Never take financial advice from somebody that does not have more money than you do.
- If you have one of these “blow up loans”, GET OUT NOW.
You are my student and I want to help you make profitable decisions. Call me toll free at 1-888-993-9399, and we can go over where your situation. And the National Foundation for Credit Counseling (NFCC) president and CEO Susan C. Keating says, "We have a 'teachable moment' before us. More American consumers are in need of financial education than ever before. More expansive and creative financial products have been a blessing to many, but have created real problems and barriers for others."
(Steve Dexter is the author of Real Estate Debt Can Make You Rich. He is also a loan officer licensed in AZ, CA, CO, CT, DC, FL, HI, ID, MD, MI, MN, NV, OR, UT, VA, WA. He recently appeared on "First Business Today", a televised business program that appears in 164 national and international markets.)