Thursday, June 11, 2009

Life's Lessons - Plain Vanilla

Life teaches us many lessons. As a child, I remember my father treating all my friends to ice cream when the Good Humor man came through our neighborhood. After waving down the truck, my dad would order the same flavor ice cream cones. One week it was vanilla and the next chocolate. His reasoning was simple. Everyone received a cone and nobody squabbled over who got what flavor. As he use to say, "keep it simple."

The mortgage business should be so easy. Since 2000, the types of mortgages offered to the general public became a potpourri of financial bliss - or mess. Borrower's didn't understand loan specifics. And, who can blame them with product names such as; interest only, negative amortization, option ARM and 2/28 to name a few. Yes, you can blame the lenders for steering people into ill advised products. But, personal responsibility should always be the bottom line. If you don't understand something, ask more questions, but don't sign on the dotted line until you feel comfortable.

Stevie Wonder could have seen this financial mess coming. Many borrower's were simply blinded by greed and the right to own a property at any cost. This seemed to be accompanied by little or no money down purchases. What's wrong with the plain vanilla mortgage(s) of our parents generation? Fixed mortgages for 15 or 30 years work great! They're simple to understand and have no future rate increases. You can go to bed each night knowing exactly what your mortgage payment will be for the next 15 or 30 years.

With mortgage rates hovering around historic lows, most properties are now more affordable than they've been in several years. If you can't afford to purchase a home with a fixed rate mortgage, you probably don't have enough of a down payment. Most banks are once again requiring a down payment of 20-25%. This size investment increases the likelihood that you will not walk away from a property when times get tough.
Owning your own home is a wonderful concept, but 'keep it simple'.

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