Surreal Estate

I just got screwed out of the house I was going to buy before I even bought it.
This was an important lesson for me. One that may end up costing me $15,000.
If I can save you from making the same mistake it may be worth it.

I trusted a friend who's in the mortgage business. This lender knew all about my divorce and my having to give up my home. I told this person I didn’t want to do anything stupid. I wanted a loan that was appropriate for my income and potential future income. I didn’t want to end upside down, heavy in debt, mortgaged to the hilt when I was in my 60s. I also have an excellent credit rating. I should be getting the lowest interest possible.

The lender said no problem and verbally assured me that I could afford the $585,000 home I was about to buy.  That in a couple of years, I could refinance and everything would be just fine. When I asked to come in so I could look over the figures, I was told that wasn’t necessary - we could do everything over the phone.

That should have been my first clue – but again, this was someone I trusted.

When the lending company called last week, I couldn’t ignore my gut feelings anymore and I insisted that someone fully explain what I was getting into. That’s when I discovered I was about to be saddled with a high interest, negative amortization loan. The same loan that is causing all these horrible foreclosures around the country.

My mortgage person had told me that my monthly payments would be $1250 a month. Unfortunately, I was never told that at that rate, I would also have negative debt piled so high on me that I would likely lose the house in less than five years. And what about his suggestion to refinance? Mortgage brokers are so glib about that. In order to refinance with this type of loan, I would have to prove significant equity and income. Well, if I were only paying $1250 a month there would be no significant equity. And significant income is also dicey. I’m in the advertising industry where you're lucky to be working at an agency after the age of 50. I’m 53.

So I scrambled this week and tried desperately to get a different kind of loan. When I talked to other brokers and told them what had happened, they all gasped.

“Negative Amortization?” What was that person thinking? That’s the worst kind of loan possible. That’s what’s causing all these foreclosures.”