Mortgage Option Horror Stories

3 Minute Read

When Dave says your mortgage, if you have one, should be fixed rate, no longer than 15 years and have a payment no more than 25% of your take-home pay, it's because he knows all the other options—well, they stink. When we asked our Facebook friends to tell us about their experiences with other types of mortgages, plenty of them had learned tough lessons about "creative" financing.

The ARM

Tracey Lowery Evanko and her husband bought their home in 2003 with an Adjustable Rate Mortgage. Six months later, her husband lost his job and their credit took a hit when they got behind on their bills. When their ARM adjusted, the payment went from $860 up to $1,700!

"After my husband and I worked two jobs to be able to keep up, we managed to (refinance) at a much lower (fixed) rate," she said in her post.

Some people told us they had benefited from their ARMs, but most, like Elieen Walsh Tishken, knew they were lucky.

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"My ARM adjusted down, way down, when the five-year fixed term expired," she said. "We're enjoying it while it lasts but realize it won't last forever."

Chris Singleton warned us of the dangers of an option ARM, an Adjustable Rate Mortgage that allows buyers to choose from several payment amounts.

"Being young and stupid, we always paid the lowest option, which was only 90% of the interest," Chris said. "What we didn't realize is now the balance has gone up $26,000… We will never do anything but a fixed rate in the future."

Gambling With Your Home

Adam Gutschick said he had what he called the anti-Dave Ramsey mortgage, an 80/20 (80% of the home's value on a first mortgage and 20% on a second) and the 80% portion was interest-only for the first 10 years. His lender told him he would be able to sell his home in a few years and make enough to pay off the mortgages and have a down payment for a new home.

Then the housing bubble burst.

"Don't gamble when buying a house," he said, "or you might be paying stupid tax on it."

Get Advice You Can Trust

A lot of people, like Tracey, Julie Murtha Geraci and Eric Heth, said their real estate agents suggested these terrible loan options. Eric had some strong words of warning about that.

"I said, 'No way!' (The agent) persisted until I said we were there to buy a home, not lose one. He dropped it. Don't get sucked into that scam!"

Work with a real estate agent you can trust, like one of Dave's Endorsed Local Providers (ELP). Your ELP is an expert in your area who won't try to sell you on a home you can't afford. You can trust your ELP to make the buying process easier and get you the best deal. Contact your ELP today!

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