"Shhhh" <123[at]456.com> wrote in message
news:XYadndXd6aAgu73YnZ2dnUVZ_qWdnZ2d[at]comcast.com...

- quote -


(a) Folks with "past credit problems" are *documented* in their inability
to handle money. No ifs, ands or buts. They can't handle money/credit
and it's on their permanent record.

An interest-only loan is just yet another black mark on the old credit
report if you ask me. It shoots the big red flair up into the sky that
says: "I'm being taken by the bank, and I'm either too ignorant to
know it or I know it, but just don't care" -- in either case, it just
confirms, in my mind, the previously documented inability to handle
money inteligently.

- quote -

(b) They're fixing their finances, so in a few years they'll have
nothing and the banks will be all fat and happy at their expense.
How is this "fixing" anything other than borrowing time in a house
that wasn't affordable in the first place, and buying a few years
living beyond their means?

- quote -

(c) "fair" has nothing to do with it. Is it unfair that my neighbor drives
a new $45,000 "duely" pickup while I drive a $3,000 used (12 year
old) Saturn? It's got nothing to do with "fair" and everything to do with
"what makes sense".

(d) even, supposing, "fair" is relevant -- then h3ll yes! it's fair. You
are, and always will be, a product of your past. You reap what you
sow. That's as "fair" as "fair" can be. If you can't afford something
(due to whatever reasons -- including "problems in your past"), then
you simply can't afford it and appeals to being "fair" aren't going
to make it any more affordable.

John A. Weeks III wrote:

- quote -

I thought I heard someone outside my window...

-Will

In article
<chainyanker60-8951E1.09430502102006[at]newsclstr02.news.prodigy.com> ,
The Guy <chainyanker60[at]nyetspam.hotmail.com> wrote:
- quote -

This is where you apply the U-Haul solution. Houses are available
in nearly every city in the vast United States. They range in price
from a few thousand dollars to millions of dollars. If you live
some place where your income cannot afford to buy a home, you have
two choices--increase your income, or go some other place where
your income will support a reasonable house. Humans have migrated
all over this planet in search of the right economic conditions to
live and raise a family. You have that same ability to find a better
hunting grounds, and in fact, you have a moral responsibility to
your family to do so.

Lets say you do get that $650K loan on an $80K income. $80k will
net biweekly paychecks of about $2000. If, by some miracle, you
get a 6% fixed loan, the interest only that first month is going
to be $3250. What good does that do? It eats up almost all of
your monthly income. If you can feed your family on the left
over money, who is going to pay for heat, lights, car, property
tax, etc?

I guess that is why I see so many two story homes where half of
the rooms on the lower level have absolutely no furniture what
so ever, and the rest looks like it came from good-will?

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

In article <john-58B3C0.11352201102006[at]sn-ip.vsrv-sjc.supernews.net> ,
"John A. Weeks III" <john[at]johnweeks.com> wrote:
[stuff deleted]
- quote -

I'm late to this discussion, but in many parts of this country a 3x
income home price is unrealistic...median income for a household is
around 80k around here (Zip 92630) but the median house is around 650k
and it's not what I would call an upscale neighborhood (relatively
speaking) just plain old tract homes mostly. 3 x 80k = 240k, short 410k
is it any wonder some take out interest-only loans, the alternative is
commuting 1 - 1.5 hrs each way or renting a 1 bdrm apt for $1600+ if you
can find a vacancy (good luck.) Of course one could always move to a
less desirable/cheaper area but at what other non-$ cost?...it's a tough
situation.
--
Chainyanker

TYPO

- quote -

- quote -

My Roth IRA was fully funded all those years, car was paid off prior to
moving in. Wife made 50% of my salary at the time.

- quote -

John was right and I do think bad he made that conclusion (even if it
were wrong). When I started with this company we were paid once per
month at the END of the month. That was tough first 6 weeks.

- quote -

earning potential in her field (Human Resources) than mine (software).
My salary has nearly doubled the 7 years I've worked in this job, but
I'm smart enough to see most of my wife friend's make 6 figures and
that will come to her in due time.


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

In article <CeYTg.167194$QM6.11005[at]bgtnsc05-news.ops.worldnet.att.net> ,
"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote:

- quote -

Then you are clearly mistaken. I wrote nothing that was
discriminatory or chauvinistic. I merely stated a fact. A
fact is neither positive or negative, it just is.

The fact is that when a 2nd spouse enters the work force, and
has to obtain day care and transportation, the net profit from
such an adventure is normally relatively small, often times hardly
worth the effort. In our society, that 2nd spouse is most often
the woman of the family. I am sorry if you don't like how our
society works, but don't take it out on me if you don't like
the facts.

Of course, there are exceptions. 1% of the workforce are
people who earn in the top 1%. 5% of the workforce are people
who earn in the top 5%. The other 95% are in the bottom 95%.
Again, you don't have to like that, but since it is a fact,
you cannot argue if it is true or not.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

"John A. Weeks III" <john[at]johnweeks.com> wrote in message
news:john-896543.17503801102006[at]sn-ip.vsrv-sjc.supernews.net...

- quote -

[a lot of other chauvinistic and discriminatory drivel snipped.]

I clearly see that nothing of what you post has any validity.

Elizabeth Richardson

In article <XYadndXd6aAgu73YnZ2dnUVZ_qWdnZ2d[at]comcast.com> ,
"Shhhh" <123[at]456.com> wrote:

- quote -

I am all in favor of you sharing in the American Dream. But if you have
bad credit, buying a home is just as likely to become a nightmare. You
would be far better off renting for a few years. That would let you
rebuild your credit so you can get an inexpensive traditional loan.
It would also let you live for less, so you can save up a much larger
down payment. That way, once you do buy a house, it is a slam dunk
good deal, and you will not end up back in foreclosure soon, or have
that balloon explode on you.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

In article <451FF4AB.6030002[at]paragondynamics.com> ,
Will Trice <wwtrice[at]paragondynamics.com> wrote:

- quote -

Thanks for looking it up. That was a somewhat special case. The poster
in that case had a 1% income ($175K), and had liquid cash in excess
of his mortgage, and at that time (and since then), both the market and
CD's are returning equal to or higher than his interest rate. In that
case, he could invest the money, look for upside, but if worse came to
worse, he could pull the money and pay off the mortgage. Few people
have that kind of non-qualified funds sitting around like that.

- quote -

I am going to give in. Yes, there are occasionally times when an
interest only loan makes sense. But that is not how the vast
majority are being used. Just on Friday, the US Government had to
issue a warning to lenders that most interest only loans that have
been issued recently were given to people that could not afford them.
If you avoid them altogether, you will be right 99% of the time.

If a person moves often, they should rent. Renting is a great deal
right now. It doesn't make sense to pay closing fees on the way in,
and real estate commission on the way out to get in and out of a
home. Renting eliminates all those costs, and adds a great deal
of flexibility.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

In article <AUSTg.9884$QZ1.4464[at]bgtnsc04-news.ops.worldnet.att.net> ,
"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote:

- quote -

Yes, I did jump to a conclusion. One has to. There isn't enough
time and space on this page to say everything about one person's life,
and I cannot force people to write all the details that one would
like to have. So, knowing that most poeple in the US that get a
regular paycheck get one every other week, or one a month, so when
he said "one of his paychecks", I knew that there was at least 2,
and I was willing to bet my on-line reputation that was exactly 2.
Sometimes you have to be willing to risk it all when the odds are
in your favor.

- quote -

I don't put too much emphasis on a wife's income unless the poster
writes that it is substantial. All too often, what I see is a
woman who hardly turns a profit after paying for daycare, a car
to drive to work, extra work clothes, and gas and insurance for that
car. Then many women choose to take time off for children, or have
child responsibility and have to leave work often to pick up sick
kids from school. Again, if you have to count on that to make ends
meet, then I suggest that you are playing the wrong game.

- quote -

Actually, a few postings back, I saw you write something that struck
me as something that I could have written. You are just a little
nicer than I am. I don't tend to coddle anyone, and I am not going
to lie to anyone or give them a pat on the back for doing something
that I think is dumb. I don't so much think that folks are
irresponsible. Rather, I think many younger folks lack life
experience and don't realize the long term risks. And I think that
too many people are so wrapped up in their day to day lives that they
don't stop to think about what they are doing long term. But I think
one could make a good argument for irresponsible if you look at all the
zero down loans, the astoundingly high foreclosure rate, the vast
amount of credit card debt, the evaporation of home equity used to
by consumer goods, the tiny amount that most people have saved for
retirement, and on and on and on.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

What do you say to people who have the cash flow to afford a mortgage, but
do to past credit problems can't get approved for anything but interest
only... These people are fixing their credit so in a few years they'll be
able to refinance into a better mortgage. Seems unfair to suggest problems
in the past should keep someone (even a family man/woman) from owning a home
and sharing in the "american dream"

Just my 2 cents,
Shhhh

- quote -

"John A. Weeks III" <john[at]johnweeks.com> wrote in message > > For house #1 it was a condo, house #1 and within 1 year of moving I
- quote -

Aren't you jumping to conclusions? Nowhere does it say how often he got
paid, so you don't know for certain that he received only one other check
per month. Additionally, you conveniently forgot that his wife also had a
job, so, even if he did, in fact, get paid twice monthly, there was other
income in the household. John, you so easily assume everyone else is
financially irresponsible and that just isn't fair to the vast majority of
posters to this newsgroup.

Elizabeth Richardson

John A. Weeks III wrote:
- quote -

See
http://groups.google.com/group/misc....d7f9afcef2ee22


- quote -

In many cases you're right. But wouldn't an interest-only sometimes
make sense for those who purchase property, but move often? I was
flipping through _The Millionaire Mind_ at the book store yesterday and
it says that 20% of households move every year (it did not say how many
of these buy and sell homes each time, but the implication was that many
do). And the average time a household stays in a home is something like
7 years, I think. Now you could argue that these kinds of people should
be renting, but if they buy, mightn't an interest-only make sense in
some cases?

- quote -

_The Millionaire Next Door_ does not really discuss this much, though
_The Millionaire Mind_ does. Both books mention the modest home part,
but the latter book also states that 49% of millionaires have
outstanding mortgage balances (I read this yesterday and I'm quoting
from memory, so I may have the percentage wrong). I am surprised at how
high this percentage is, especially given that the average age of
millionaires surveyed was something like 57.

- quote -

By this, are you referring to a spreadsheet? I bet a lot of
millionaires play with spreadsheets.

-Will

In article <1159669462.013183.88760[at]b28g2000cwb.googlegroups.com> ,
"jIM" <noreplysoccer[at]hotmail.com> wrote:

- quote -

In my opinion, spending a full paycheck on shelter is totally out of
whack. You should spend no more than 1/2 a paycheck, 1/3 is even
better. In the situation above, one paycheck each month goes to
a building, which leaves on one paycheck a month for living expenses,
entertainment, and savings for the future. One of these ends up
short changed, and the person is living in a high risk situation.
An interruption in the pay check flow means the house goes away.

- quote -

That might have worked out OK in the 1970's. Today, you cannot count
on a career path. In the industry that I am in, I have seen average
wages cut in half since 2000 as jobs are given to folks from India
who will work for pennies on the dollar. I have seen whole entire
areas of the engineering field move to Malayasia.

Years ago, a person was in their peak earning years from age 50 to
age 65 as they got seniority and was at the top of the pay scales.
Today, once you hit 50, you are most likely ejected as cannon fodder
so they can hire some drippy-nosed 23 year old who is going to be far
less costly to provide health insurance to. That is why there are
Subway stores on every block in every city of the US these days--
there are so many older men who are out of work and cannot find a
job to save their lives that they have to buy a franchise in order
to get an entry level job.

Buying a house where survival depends on getting raises and promotions
at work is a plan for disaster these days. The only safe thing to do
for your family is to buy what you can afford, and move up after you
can afford to do so.

- quote -

For someone who is established and financially well behaved, a 3x
income home price is not out of line. What is being discussed is a
2x mortgage. If you earn $100K, a $200K house is reasonable if you
have nothing down. But if you have $100K equity in your old house,
then the $300K house is reasonable.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

- quote -

I agree.

In the case of the OP, It appears to me he has $2200 of cash flow to
pay down debt. Car A, Car B or house.

My suggestion would be to pay the 30 year fixed cost, which increases
the amount he was paying by $250 per month. The use rest of cash flow
to pay down debt like cars, and get situation on a steadier course.

I have bought two houses in my life. Both were above the 2X income
limit of SGT.

For house #1 it was a condo, house #1 and within 1 year of moving I
received a raise from work and my wife got a new job. Payment was one
of my paychecks. Still had some debt when we moved in.

For house #2 4 years later we bought house #2. We were debt free on
close and just finished paying off car repair bills which approached
$12,000 for 6 months in 2006. My wife started a new job 1 week before
we closed and I received 2 significant raises for around a 10% salary
increase since we moved.

There is more to the decision of buying than just the income. Knowing
the career paths of purchasers and raises typically given, it makes
some sense to take some chances. In our case we have NO kids (just my
wife and me) so if a mistake is made the two of us will work through
it.

I would assume a more family oriented person would have to take fewer
chances, or older couples would want to take fewer chances and heed the
advice of the 2X income=home price. When we moved it was 3X income
(combined)=home price.

The guideline I tell my wife is my SS benefit if I die is more than
enough to cover the mortgage payment. That and we have a term policy
which would pay off 6/7 of the house' value as well. Since we own more
than 1/7 of the house, looks good to me.

John A. Weeks III wrote:
- quote -


An interest-only or zero-amortization loan might make sense for
investment property like a rental house. It would reduce the amount of
money the investor had sunk in the property and would increase his
monthly cash flow.

An interest-only loan is totally inappropriate in my opinion for one's
residence. However if you already have a zero amortization loan, there
may be other loans that should be prepaid first before attacking the
mortgage. Any very-high interest loans, or any loans with a low balance
should be retired first -- then start paying down or refinance the mortgage.

Best regards,
Bob

John A. Weeks III wrote:

- quote -

John, I'm still with you on this. I think that limited [contrived?]
circumstances which are the exception, not the rule, don't become a
precedent for 'good planning'. One party of a two earner couple about to
take a year off, may be an exception, where a fixed time of interest
only, or negative amortizing, isn't the end of the world. Provided the
wage earner comes back with a pre-sebatical income that they can get
back on track.
The OP of this thread wasn't in such a position, he could afford the
regular payments now, but it appeared that with the wife out having a
baby, the numbers didn't add up, and whoever suggested he was already
over his head was dead right, IMO.

Mark, rigid dogma may be close, but I do think that in this format the
goal is to provide general information, and the generalities do become
pretty rigid. Do all people with a neg-amort mortgage fall in to ruin? I
doubt it. But (unsubstantiated generality) I'd think that the number is
higher for them than for the 30yr fixed crowd.

At the other end of the spectrum you have Sgt Sausage advocating no more
than 2X annual income on a mortgage. That would be just over half what
the banks would lend on a standard fixed 30 year mortgage. When I bought
my house in '96, the mortgage was 2.1X our income, so I'm guilty of
being on his end of the great bell curve I guess.
JOE

In article <451EA518.8090301[at]paragondynamics.com> ,
Will Trice <wwtrice[at]paragondynamics.com> wrote:

- quote -

I'd love to see a link to what you are referring to. It must have
been some rather specific advice since I myself do not advocate that
in general. I do sometimes post what other expects would suggest,
but I always clearly state that "others might suggest..." or the like.

Not prepaying a 30 year mortgage means that you are still on track,
although getting there a little slowly. An interest only loan means
that you are setting your family up for disaster.

- quote -

Actually, what it says is that millionaires tend to live in surprisingly
modest homes that are for the most part fully paid off. You don't
see the typical millionaire playing the lottery with risky financial
tools to extract the n-th penny from the Elliot Waves when Capricorn
is in the 8th house. With the typical wealthy person, the home is
the family castle.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

John A. Weeks III wrote:
- quote -

You talk about averages for savers yet you pick an extreme for fund
performance between 2000 and 2005. Many savers have saved considerable
amounts of money during this period as well.

- quote -

You have stated in this newsgroup in the past that not paying down a
thirty-year mortgage early and instead investing the difference may be
beneficial (under the caveats of good stock market conditions, and a low
mortgage interest rate). Under some circumstance, aren't interest-only
mortgages, coupled with increased investment, just an outgrowth of this
philosophy?

- quote -

I can find no mention of interest-only mortgages in this book. It does
show that millionaires are unafraid of mortgages, but as far as I can
tell, not what kinds they use.

-Will