Was Anyone Else As Stupid As Us (and probably 1/2 of my neighbors)

[TheSouthernBelle]

I'm very confused by the math in this thread. That was a mediocre fixed mortgage in summer 2022. It was was a complete rip off for an ARM. It sounds like you didn't shop the loan at all? And builder are giving out loans in Florida? What on earth?

I would go sit down with your banker at an actual bank and come up with some options. If I were going to refinance, I would want to do it now. And I would want to talk to actual bankers with actual math. You can do this with a mortgage broker as well, there are many professionals who can help you with this who aren't builders.

There are so many red flags with new homes sales but I think the bottom line for most, is that the ARM ends up being the only way most people, not saying the OP, can afford a home. Builder financing usually comes with some promos like x amount of dollars of free upgrades or free lot, etc. That's how they get you to use their lender. That's not just a FL thing. We built our home, not in FL, in 2006 and used the builder financing since it came with promos too that couldn't be beat but it was a conventional loan, not an ARM. We would have paid $35,000 more for our home if we used our own financing. And 30 days after we closed, it was sold to another lender and was the prevailing rate at the time. Also, it sounds like the OP was itching to get back into homeownership, so when you have a short fuse or are under pressure, you're probably less likely to do your homework and may miss the fine print.

 

[DLgal]

I'm very confused by the math in this thread. That was a mediocre fixed mortgage in summer 2022. It was was a complete rip off for an ARM. It sounds like you didn't shop the loan at all? And builder are giving out loans in Florida? What on earth?

I would go sit down with your banker at an actual bank and come up with some options. If I were going to refinance, I would want to do it now. And I would want to talk to actual bankers with actual math. You can do this with a mortgage broker as well, there are many professionals who can help you with this who aren't builders.

All new home builders have a preferred lender they work with. It's not unusual at all. It's not the builder itself lending the money.

Brick and mortar banks are rarely the best option for home financing.

 

[Grace&Carolinesmom]

All new home builders have a preferred lender they work with. It's not unusual at all. It's not the builder itself lending the money.

Brick and mortar banks are rarely the best option for home financing.

These two statements are not true across the US but regional. There are some large builders like Pulte who finance their own homes for customers who buy into it. Not saying it's a good idea, but just stating the facts.

In addition, brick and mortar banks do often have the best mortgage options for customers who are taking out construction loans and then converting into a conventional mortgage. Many times it depends on whether the bank is funding their own mortgages or not. Again, regionally, this can vary greatly.

Personally, we have built 3 homes over the years and I have never chosen to build in a subdivision developed by a single builder OR bought a lot/builder package. Having a banking and real estate background, I see many red flags with both options. We have always bought lots where we could choose our own builder. And, shopped around for the best construction/conventional mortgages married with a good reputation for funding and servicing. I realize, however, that many buyers in other regions around the US may not have the same options we have here in the midwest when building a home.

 

[DCLMP]

Rudimentary example using real numbers from my life:

Rent is $4200 per month.

Buying a home at today's local prices and rates: $8500+ monthly housing payment. This includes a $250,000 down payment. House is $1,250,000 in an area with 1.9% total property taxes.

The $4300 monthly difference and the $250,000 down payment instead gets invested in an ETF. In 30 years, conservatively (assuming 7% annual growth) I'll have more money than that house will ever be worth in my or my kids lifetimes. I'll have somewhere around $7.1 million dollars. The house, historically, can be expected to appreciate 3% per year over time. In 30 years, it would be worth something like $3.1M.

This is how renters "build wealth" while renting. The stock market has ALWAYS outperformed the housing market.

This works when rents are lower than mortgage payments, but ALSO works when you take ANY extra you would have had to set aside for maintenance, property taxes, and insurance and invest it every month while continuing to pay a fixed monthly rent.

Why didn’t you buy before this latest bubble and rise in interest rates? I have a lot of family in California they are not paying near 8500 for a mortgage. They are not even paying near what you pay in rent. 4200 a month would get you a mansion in many parts of the country.

Maybe your theory holds water when you live in on of the most expensive cites in the country, but for the rest of us it doesn’t. Most renters don’t have your income either.

 

[TheSouthernBelle]

These two statements are not true across the US but regional. There are some large builders like Pulte who finance their own homes for customers who buy into it. Not saying it's a good idea, but just stating the facts.

In addition, brick and mortar banks do often have the best mortgage options for customers who are taking out construction loans and then converting into a conventional mortgage. Many times it depends on whether the bank is funding their own mortgages or not. Again, regionally, this can vary greatly.

Personally, we have built 3 homes over the years and I have never chosen to build in a subdivision developed by a single builder OR bought a lot/builder package. Having a banking and real estate background, I see many red flags with both options. We have always bought lots where we could choose our own builder. And, shopped around for the best construction/conventional mortgages married with a good reputation for funding and servicing. I realize, however, that many buyers in other regions around the US may not have the same options we have here in the midwest when building a home.

I'd say the midwest or less urbanized areas are probably a lot different than where I am in the south and most of FL. We have a few places like that around us, in SC, but that's usually for $1M+ custom homes. To build a new home in most areas where it's never ending suburban sprawl is one builder and that's it, no choices to bring in your own, you pick from their model line up. Most of what's built where we are is old time farmers or landowners who are cashing out their family land to developers and it's big builders that come in, subdivide into .25 ac size lots and put a 2500 sq foot $750K vinyl box with some rocks and cutesy shutters on it and it's fake farmhouse all day long lol. It definitely does vary from region to region.

 

[barkley]

Most of what's built where we are is old time farmers or landowners who are cashing out their family land to developers and it's big builders that come in, subdivide into .25 ac size lots

when we bought our former home in northern california that is exactly the kind of situation our neighborhood and all the neighborhoods around it were-former farm land sold off to devlopers/one builder situations only they were'nt subdividing into .25 ac lots-that was an OVERsized lot. the average size was .19 ac so those 2500-3000 square foot houses were wedged in tight. we lived in a rental for about a year that was in a neighborhood with even smaller lots but comparably sized homes-the sideyard on it was too narrow to fit a standard size rolling garbage can so it had to be stored in the garage

 

[afan]

when we bought our former home in northern california that is exactly the kind of situation our neighborhood and all the neighborhoods around it were-former farm land sold off to devlopers/one builder situations only they were'nt subdividing into .25 ac lots-that was an OVERsized lot. the average size was .19 ac so those 2500-3000 square foot houses were wedged in tight. we lived in a rental for about a year that was in a neighborhood with even smaller lots but comparably sized homes-the sideyard on it was too narrow to fit a standard size rolling garbage can so it had to be stored in the garage

Houses going in behind us and other new developments in the area have such small lots with such big houses that you can only access 3 sides of your house from your own side of the fence. Want to do anything on the 4th side you have to get the ok to go into your neigbors yard. It's ridiculous.

 

[DLgal]

Why didn’t you buy before this latest bubble and rise in interest rates? I have a lot of family in California they are not paying near 8500 for a mortgage. They are not even paying near what you pay in rent. 4200 a month would get you a mansion in many parts of the country.

Maybe your theory holds water when you live in on of the most expensive cites in the country, but for the rest of us it doesn’t. Most renters don’t have your income either.

We didn't have the income to qualify for a mortgage. We are a one income military household. We did not get a choice in where we were stationed for 22 years. We were in Southern CA for 18 of those years, in the beginning and at the end. Housing has always been through the roof in this region. Our housing allowance was always enough to cover rent. My husband just retired the first of this month. Our income has now doubled, but buying a home is still not in the cards. We couldn't qualify for anything on the market where we live.

And your statement about rent and income is completely false. Plenty of high income earners are renters. It's close to 50% in our small city alone.

Not many people here can afford an $8500+ mortgage either. That's why there aren't many houses for sale. And why the ones that ARE for sale are over $1.5M. People buy houses with cash here.

 

[gottalovepluto]

This is a nightmare. I'm sorry to hear this. I don't even have a solution to offer.
Were the leaks in your roof storm related? Or do people there file claims for maintenance problems? I'm not meaning to be snarky but around here, needing a new roof would be considered part of "upkeep" and would only file a claim if something caused damage. Is the insurance claim not paying to replace the roof?

Their insurance company is insolvent.

 

[gottalovepluto]

are there no tiles left at all on your roof?
wow! Hmm… is it Worth it to just stop paying the mortgage and consider what you’ve put in “rent”?

Obviously they would need to discuss with a foreclosure specializing lawyer but I suspect the problem with that is the bank might be able to make a case for them having wasted the property with their failure to maintain the roof- potentially giving the bank the option to do a judicial foreclose and then pursue them for any difference in price. Judicial foreclosure is a pain in the behind but for 100k I think a bank would do it.

 

[mamapenguin]

Rudimentary example using real numbers from my life:

Rent is $4200 per month.

Buying a home at today's local prices and rates: $8500+ monthly housing payment. This includes a $250,000 down payment. House is $1,250,000 in an area with 1.9% total property taxes.

The $4300 monthly difference and the $250,000 down payment instead gets invested in an ETF. In 30 years, conservatively (assuming 7% annual growth) I'll have more money than that house will ever be worth in my or my kids lifetimes. I'll have somewhere around $7.1 million dollars. The house, historically, can be expected to appreciate 3% per year over time. In 30 years, it would be worth something like $3.1M.

This is how renters "build wealth" while renting. The stock market has ALWAYS outperformed the housing market.

This works when rents are lower than mortgage payments, but ALSO works when you take ANY extra you would have had to set aside for maintenance, property taxes, and insurance and invest it every month while continuing to pay a fixed monthly rent.

I think there are more variables in the housing market. The house I sold last year had more than doubled in price since its 2012 original purchase. People should do what works for them, but I stay away from the word always.

 

[DLgal]

I think there are more variables in the housing market. The house I sold last year had more than doubled in price since its 2012 original purchase. People should do what works for them, but I stay away from the word always.

There will always be outliers when you are discussing averages. I mean, for several years, my investment returns have far exceeded 7%. Our highest annual return was 38%. So, of course there are always instances of massive appreciation in housing as well as massive depreciation as well.

 

[princesscinderella]

@SomewhereNotAtWDW my suggestion is to get in contact with a mortgage broker in your area and let them know your situation and they should be able to help you figure out a path to getting a fixed rate mortgage product that will fit within your budget. It may not be right away but they sometimes have access to special financing programs that might work for your situation if you don’t know how to find one in your area reach out to one of the busy realtors in your area and they can recommend a good mortgage broker.

There’s never a perfect time to buy but holding long term always beats the ups and downs of the market so I hope you can find a way to keep your house as it will be worth it.

 

[tink89]

I was just about to ask if people forget 2008…and then I realized that was 15 years ago, so obviously a large number of home buying aged adults were not probably paying any attention in 2008 since they were babies.

And I then wanted to know how 2008 can possibly be 15 years ago?!?!?!

Im in my early 30's and remember 08 and is exactly what i was saying reading this? Did no one remember what happened then. I was young when it happened and had a few family members lose their homes when their interest rates went up and they could no longer afford it. OP is in their 40's with they should have looked up some info.

 

[gottalovepluto]

Im in my early 30's and remember 08 and is exactly what i was saying reading this? Did no one remember what happened then. I was young when it happened and had a few family members lose their homes when their interest rates went up and they could no longer afford it. OP is in their 40's with they should have looked up some info.

They fell into a natural human trap- we see what we want to see. Sometimes when we know what we want to see we seek out viewpoints and info that affirm our desires in doing our “research”. OP admitted that in retrospect that played a role, specifically when they let the contractor talk them out of a realtor who could have provided other perspectives/options/ideas.

 

[Juliet25]

Im in my early 30's and remember 08 and is exactly what i was saying reading this? Did no one remember what happened then. I was young when it happened and had a few family members lose their homes when their interest rates went up and they could no longer afford it. OP is in their 40's with they should have looked up some info.

But interest rates actually went down then. We bought in 2005 with a 5/1 ARM and our rate lowered when it adjusted in 2010.

Not saying we made a good financial decision. We bought in 2005, and we took a beating when we went to sell the house. But our payments dropped $200/month for the last two years we were in it.

 

[goofytinkerbell]

1

 

[DCLMP]

I swear, you just described everyone I work with.

I bought in 2014, and I got fixed even though it cost more. I had to have stability in my payments, and now I'm glad I did. But it'll be coming up for renewal.... next year maybe? (can't remember off the top of my head) and it's going to HURT. I recently did a renewal calculator and saw that my biweekly payment would be going up a bit over 23% if I renewed right then. That was before the latest interest hike and I'm sure there will be more before my renewal date arrives.

Meanwhile my coworkers were all telling me to take variable, and it's hitting them now. I've been trying to pay down my bills and get myself set up to survive when the renewal date hits.

To the OP: Don't beat yourself up. It was an expensive lesson, but you can't go back in time. I often tell myself I'd never have bought a house if I could go back, but if I really look at the situation I know there's no way I'd be able to afford to pay rent in this market. Rents here are much more than I pay for my mortgage. So all in all, you may not have even been better off if you made a different decision. The important thing now is to figure out what you can do next.

If you have a fixed rate why is the interest rate changing?

 

[IAmAHiddenMickey]

If you have a fixed rate why is the interest rate changing?

Canadian mortgages are a 5 or 10 year terms and then you have to renew them which is at the current interest rates.

 

[tvguy]

Canadian mortgages are a 5 or 10 year terms and then you have to renew them which is at the current interest rates.

But you can get 30 year fixed mortgages too. Just a slightly higher rate. And you are gambling that rates won't plunge. Of course you can also refinance if that happens.