I just came back from a pottery workshop and sale.
I had some of the more valuable pots still with me when I went to the bank to deposit checks and allocate some money.
While I was there I saw my mortgage banker.
When she did not know me or my husband, many years ago, she explained mortgages and interest and loans to us.
You see, no one in my family was in a position to do this for me, as they had mortgage troubles of their own. And where we live, the real estate is very strange, sandcastles on the beach and cottage fisherman shacks barely to code, not to code fixers, and everything in between.
Jeff's dad had built his house, so no current advice there either.
This woman walked us through it all, explaining the risks and the advantages of each kind of loan and pre-qualified us.
Now I knew.
Still I was tempted by ARMS and balloons, because I knew it would always be getting better, this was 8 years ago. He would get raises and I would make money by being awesome.
I broke my back within a year and had to rehab for recovery and the raises had to wait til the new School of the Environment was fully endowed...
She had told us not to do those crazy loans based on a promise of the future, that real estate was not a sure bet, even waterfront. That a fixed 30 or 15 was the most secure way to go, but that she would try and find us a first time homebuyers loan with mortgage insurance. It was a good choice for us. And 8 years later I am grateful that there was a mortgage broker that took the time and care to teach us instead of taking advantage of us and our newbie innocent ignorance.
So today, I reached into the POTZ! stash that I had yet to unload from my travels and pulled out a Tulip Vase and a Wisteria and Buttefly bowl and gave them to my Mortgage Broker to thank her for keeping our feet out of this fire that seems to be burning all around us. There are houses for sale everywhere surrounding us. But we didn't buy more than we could pay for and we didn't get some crazy scheme loan.
A cautionary tale from a social liberal and a fiscal conservative who believes that good karma comes around and we can all be agents of change in the world, even investment bankers.
My banker is a good woman who now owns two of my best pots.
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fingerlakeswanderer
zanelle
Are You Talking French?
Greer McVay
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Brent Troth
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For her, she was just doing the ethical thing for a young couple starting out.
As this whole economy thing has blown up around my ears and we have remained safe with a home and a safe secure reasonable loan that makes for a safe home for me and my family...I have thought of her and the time she took with us many times over the last few months.
And I gave her the best that I had. Just like she did for us.
(rated)
I wrote this definitely to praise my banker, not to toot my own horn.
I think a couple fo pieces of crockery were pretty lame compared to what she did for us, but it's all I have right now, you know?
When I suddenly gave birth late in the game, I basicly quit my work and stayed home with him. Now that he is in school, I can work. If it had not been for Dorothy K., I would not have been able to stay at home, because one of the thigs she did was pre1ualify us based only on his income, which kind of hurt my feelings at the time, but was how you should do it if one of your incomes varies wildly by the season. You need to pay your mortgage all year, not just when you are flush from a show or it being Christmas Sales time.
She is really smart and the things she taught us ought to be taught in school. There are a lot of parents who A) don't know this stuff or B) never talk to their kids about money or C) tell their kids stupid things about money.
She is one of my local heroes. My potz will do fine, because I know she likes them because she bought one a couple of years before I had the baby and stopped working. She is also very rich. And that is a selling point to me when I am looking for a financial advisor.
Never trust or take the advice of a broke broker.
You were fortunate indeed :-)
I spoke to a woman in Birmingham yesterday who was interested in obtaining a mortgage loan for a home she wanted to purchase.
She worked for the Social Security administration. She made $37,000 a year (if I remember correctly, I am rounding this number up).
She wanted to know if she could purchase a condo that was about to come on the market at a below market price - $240,000.
I don't know if any of you own a mortgage calculator, but a $228,000 loan at 6.375%, which is a tad below par on a eight story condo carries a principal and interest payment of $1,421 if it is amortized over 30 years. Kick in the mandatory HOA payments of $250 per month and the payment jumps to $1671. Add the escrow for property taxes of $150 per month and you get a grand total of $1821.
$37,000 divided by twelve gives you a gross monthly paycheck of $3083. This is before Uncle Sam, Uncle FICA and Auntie Healthcare get their cut.
The front end ratio on this scenario, which is the amount of the mortgage payment divided by the income, is a whopping 59% The back end ratio for this particular borrower would have been 80 plus percent.
To put those numbers in perspective, the traditional qualifying front end/back end ratios for conventional mortgage loans is 28%/36%.
FHA, which is a little more aggressive, states that it prefers ratios of 29%/41%.
Do you think this borrower cared about that?
Now in all honesty, there is more to her story. She has been promoted to a new job, which starts next week. She has two other sources of income, although there is no way to prove that she actually earns an additional $14,000 a year selling real estate and cleaning office buildings.
If we could show this income, her ratios would fall to a more sensible, although still high, 38%/53% ratio with a total income of $4800 per month.
Three weeks ago, I could have canned the Suze Orman schtick, stated her income, and gotten her a 97% loan to value loan, even though her credit score is only 553.
The rate would have been somewhere around 8.5% to 9.0% - but only for two years. Then it would start to adjust, and adjustable rate mortgages practically never adjust downward.
So someone who could only put down $8000 would be struggling to make a $2203 house obligation - the new principal and interest payment at 8.5% is $1783 - mostly because the lenders who make subprime stated income loans had been pretty good at gauging how much we were fudging the income numbers to make deals work.
She doesn't sell a house one month - or two - or loses the cleaning contract, or gets sick and can only work at her desk job, and she is fucked. The lender is fucked. Her neighbors are fucked.
The upshot of all of this? My email box is full of emails from her, lambasting me for the "cautionary tone" I took with her regarding the challenges she faced, especially in today's lending climate.
Why does a woman who has been out of bankruptcy less than four years ago want to do this to herself? She is not alone - I have stacks of files on my desk of people who want to buy houses they can't pay for, with - what else - no money down. And credit that is anywhere from shaky to downright shitty. But do they take my counteroffers, good solid pre-qualification letters that show them what they can qualify for and get 6 or 7 percent fixed rate loans?
Hell no.
My best borrowers are redneck men. Tradesmen, men who do the kind of shit we'll always need, the kind of men who expect to work at least six days a week. They tell you up front, "hell naw, ain't no damn way Ima pay more'n eight hunnert dollars a mont' for no damn houwse nowte."
These are guys who make 60K , 70K, 80K a year, and sometimes more, a whole lot more if they can get unlimited overtime. They don't dicker over a quarter point, so long as you lcok them in at the rate you told them you were. And if you look at every mortgage they've ever had, even if they've been divorced, they are almost never late.
Blaming congress for our personal shortcomings isn't even a shot in the right direction. All of these ways to bleed a borrower dry depend on the borrower feeling the NEED for things they WANT. Nobody NEEDS a $1200 a month car payment, but you would think they gave BMW 745i's away around here the way they pop up at every stop light.
I can't think of one portable electronic device that is a necessity - including cell phones - yet most of us think we can't live without them, that our kids won't be safe if we can't have a way to instantly contact them at all times. Unless you work in the field, which most of us don't, you don't need them. I have a phone on my desk and two at home. When I forget my cell, I don't even miss it.
The most expensive meal I ever ate growing up cost less than ten dollars at the local Western Sizzlin'. My father could take all of us out for steak dinners on Friday nights for less than thirty five dollars. The last time we all ate together the bill was almost a hundred and fifty dollars at a casual dining restaurant - the kind of place we would have dressed up for thirty years ago.
All of this good living everyday is going to kill us dead if it doesn't bankrupt us or smother us in our own fat first.
Of course, after I write all this, I am going to go outside and puff on a $5.00 cigar and sip on a bit of especial tequila, or a bit of VSOP cognac.
Being an American these days is a bitch, ain't it?
[still smoking the cigars - haven't had any cognac in awhile]
You were incredibly fortunate.
Gorgeous pots too.
Ideally, that's what american business is supposed to be about -- everyone gives their best, because that is all they know how to do, and everyone comes away with something from the deal.
Too bad there are too many out there who have forgotten that.
And then she told me that most people don't know, even the ones that think they do. That the rules change every year and different packages are invented regularly to entice new home buyers.
She explained how buyers and sellers agents worked and how it was an ethical conflict if someone purports to have both of your interests in mind as they act as both for you and the other person.
She suggested that I get my own agent or at least my own lawyer to review everything. And I needed one. Condemned septic system where the seller had remodeled and put in three bedrooms on a plat with septic rated for two bedrooms. It was complicated, but we all stayed civilized and we love our home.
But I can only think of a hundred ways we could have been fleeced or up the creek if we had bought some of the properties that we had looked at before she helped us.
I appreciate the comments here. Maybe this post and Kris's other side of it, and the idea that if you admit you don't know everything, and that showing gratitude is easy if you let it be easy...maybe this post will help somebody out.