Sunday Briefing: Was The Mortgage A Mistake?
Staff writer Michael Rosenwald offers a revealing glimpse into one Montgomery County family's decision to buy a house using a risky interest-only loan:
There's lessons in the candid piece for all of us.
Tell us your mortgage story, or other personal finance adventure. You might even have some tips for Michael.
In the meantime, here's an excerpt:
Two years ago, my wife and I sat at a long conference table in a mortgage-title office in Bethesda. Sitting next to us: our real estate agent, who drew up our bid on a townhouse in Germantown two days after showing it to us. We didn't get an inspection, and I don't recall going back for a second look. We had to act fast or someone else would get it.
Our bid won the house -- our very own first home -- and now we had to close the deal. The owners sat across the table. They seemed more nervous than we did, perhaps fearing we would have second thoughts -- about our risky interest-only mortgage, about seeing them walk away with a $120,000 profit, about buying a house just as "bubble" was entering the regional lexicon.
They signed. We signed. Price tag: $459,275.
And then, as the saying sort of goes, the stuff hit the fan. The sizzling home market almost immediately began to cool off, which my wife and I sort of ignored. Interest rates started to creep up, and we sort of blew that off, too. We have time. This too shall pass. No worries. Life is good! We bought a flat-panel television, took a nice vacation, bought a dog, hired him a daily dog-walker, and then we got pregnant. We have time. This too shall pass.
But now, with our baby due in six weeks, the stock market has taken a serious drive south, with the Standard & Poor's 500-stock index dropping 6.9 percent since its high on July 19 after problems emerged for subprime lenders, who gave loans to people with spotty credit at the height of the frothy housing market. The contagion from the busted subprime sector has hit credit markets hard, and now Brian Williams and Charlie Gibson and Katie Couric are talking every night on the national news about how hard it will be to get credit, perhaps leading to more problems in the housing market.
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