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(former)FormerSanDiegan
ParticipantI agree with sduuuude.
You should consider buying a personal residence that you will live in for a year or so, then rent it out and buy another personal residence.
As far as qualifying. In the old days (pre-2003) lenders typically required a lease agreement if you want to count the income from the rental property. They typically use 75% of the gross rent as income when computing your ratios.
The nice thing about this is that it forces you to be conservative when buying your next (personal residence) property.
To maximize profits you may have to be a renter for a few months between properties so that timing lease of the old property and buying a new one is not as important as getting the best deal.
ParticipantI believe that folks with option ARMs are toast.
However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.
The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.
Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
ParticipantI believe that folks with option ARMs are toast.
However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.
The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.
Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
ParticipantI believe that folks with option ARMs are toast.
However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.
The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.
Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
ParticipantI believe that folks with option ARMs are toast.
However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.
The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.
Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
ParticipantI believe that folks with option ARMs are toast.
However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.
The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.
Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
ParticipantThis is an option ARM chart. Not Alt-A.
Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs
Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…
ParticipantThis is an option ARM chart. Not Alt-A.
Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs
Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…
ParticipantThis is an option ARM chart. Not Alt-A.
Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs
Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…
ParticipantThis is an option ARM chart. Not Alt-A.
Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs
Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…
ParticipantThis is an option ARM chart. Not Alt-A.
Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs
Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…
Participant[quote=BGinRB][quote=FormerSanDiegan][quote=BGinRB]I just tried to think of model of a person who could really afford a $300K housing unit. I don’t see that person being interested in 55y old 2/1.
The only possibility I see would be a retiree with strong ties to the area. [/quote]How about a young married couple in their late 20’s/early 30’s making a combined 80K (40 K each) who are tired of apartment life after 5 years ?
[/quote]
I assumed they would want to have a kid or two in the next several years. In that case 2/1 would not fit. They would rent for another year or two and then look for 3/2.
[/quote]
Look at how many younger couples buy 2 BR condos. At the right price, a 2-1 seems like a great entry level option, especially for couples where having a kid is either not explicitly in the plans yet or is notionally 3-5 years in the future. In fact, we bought a 2/1 when we had a 9-month old baby. (we later added on).
Participant[quote=BGinRB][quote=FormerSanDiegan][quote=BGinRB]I just tried to think of model of a person who could really afford a $300K housing unit. I don’t see that person being interested in 55y old 2/1.
The only possibility I see would be a retiree with strong ties to the area. [/quote]How about a young married couple in their late 20’s/early 30’s making a combined 80K (40 K each) who are tired of apartment life after 5 years ?
[/quote]
I assumed they would want to have a kid or two in the next several years. In that case 2/1 would not fit. They would rent for another year or two and then look for 3/2.
[/quote]
Look at how many younger couples buy 2 BR condos. At the right price, a 2-1 seems like a great entry level option, especially for couples where having a kid is either not explicitly in the plans yet or is notionally 3-5 years in the future. In fact, we bought a 2/1 when we had a 9-month old baby. (we later added on).
Participant[quote=BGinRB][quote=FormerSanDiegan][quote=BGinRB]I just tried to think of model of a person who could really afford a $300K housing unit. I don’t see that person being interested in 55y old 2/1.
The only possibility I see would be a retiree with strong ties to the area. [/quote]How about a young married couple in their late 20’s/early 30’s making a combined 80K (40 K each) who are tired of apartment life after 5 years ?
[/quote]
I assumed they would want to have a kid or two in the next several years. In that case 2/1 would not fit. They would rent for another year or two and then look for 3/2.
[/quote]
Look at how many younger couples buy 2 BR condos. At the right price, a 2-1 seems like a great entry level option, especially for couples where having a kid is either not explicitly in the plans yet or is notionally 3-5 years in the future. In fact, we bought a 2/1 when we had a 9-month old baby. (we later added on).
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