A Personal Look at a Home Mortgage
A Personal Look at a Home Mortgage
When my wife Amy got a promotion, we started looking into buying a house. Even with the extra income, I didn't think we'd be able to make the payments with the way housing prices kept inflating.
Then Amy came to me one day, looking solemn-faced, and said she wanted to move her brother Josh in with us. Josh and I had never exactly hit it off. While he liked to brag about how smart he was, he couldn't seem to get his own life together. Amy swore he'd changed, and said Josh had just fallen on some bad luck. It would only be for a few months, she promised. Reluctantly, I agreed to the plan.
We had turned the second bedroom of the apartment into a TV room, and each of us had taken an extra bedroom for an office. I thought Josh could stay in the TV room, but instead Amy moved her office furniture in with mine and converted the vacated room into space for Josh. I could feel myself becoming irritated with the situation before Josh even moved in.
Though Josh barely spoke to me and tried to stay out of sight, his very presence wore on me. I decided to distract myself by starting to look for homes again. Prices were as high as ever and it didn't look promising, but it was something to do when I got home in the evenings.
One night I was browsing through real estate online when Josh walked into the room and started to boot up Amy's computer. I did my best to stay focused on my home search.
A few minutes later, one of the online ads caught my eye. It was for a three-bedroom house a little way out of town. It seemed to be priced better than the others I'd seen. I switched back to the loan calculator screen on bills.com and filled in the information.
"Drat!" I said out loud, when I saw the calculated payment.
Josh turned around from Amy's computer and asked,
"What's the matter?"
"Oh, it's just that all these houses are so expensive," I grumbled. "Even this little three-bedroom I'm looking at is more than we can afford. "
Josh came to look over my shoulder. "Have you thought about an interest-only mortgage?" he asked.
I had heard about lots of mortgage options. It was a lot of information, and I wasn't sure I remembered it all correctly.
"I want to start building equity," I said. "If we're going to get an interest-only loan, we might as well just keep renting. "
"But you actually can build equity with an interest-only loan," Josh said. He proceeded to tell me how we could afford to buy the home with that type of mortgage, and any month when we could make a larger payment than the minimum interest payment, the extra would go toward the principal on the house. He also told me that interest-only was far from the only option in mortgages. Some loans offered a 30-year fixed rate with an interest-only payment for the first three or five years. And we could always refinance once our salaries increased again.
I was surprised Josh knew so much about mortgages, but I liked what I was hearing. We visited a loan officer the next week, and Amy was amazed that I asked Josh to come along. We got pre-approved and went the next day to take a look at the house. To our surprise, it was a very nice house despite being on the lower end of the pricing scale. Josh, who had been a contractor for a while, took a closer look at the foundation and basement and assured us the structure was sound.
We ended up buying the home with a five-year, interest-only, adjustable-rate mortgage (ARM) that gave us several different payment options each month. We knew we'd be able to make more than the minimum payment, especially since Amy had just gotten promoted to director of her division.
When we went out to celebrate, Josh announced he would not be moving with us. He'd found a job and was going to see about renting our apartment after we moved out. It meant we'd have more room in the new house, which was actually a bit smaller than our apartment. We congratulated Josh and promised to give him a good reference with our landlord. After all the help and guidance he'd given us about mortgages, Josh and I were starting to become friends. I was almost disappointed that he wouldn't be coming with us, but only almost.