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.
About the Author
Mike Makler Offers Financial Services (Mortgages,Life Insurance, Annuity) in Florissant Missouri which is in North St. Louis County Missouri Just Across the Bridge from St. Charles Missouri
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