Financial Food Poisoning?
If you read Norton Juster's "The Phantom Tollbooth" as a kid, you're familiar with the concept of subtraction soup. As the characters dine on a concoction called "subtraction soup," they become hungrier by the spoonful. They feel ravenous at the conclusion of the course.
"An option ARM is like subtraction soup, except that a steady diet of minimum payments can result in a feeling of homelessness instead of hunger. To pile on the alarming rhetoric, a recent cover story in BusinessWeek dubbed the option ARMs "nightmare mortgages" and called them "toxic" and "deceptive."'
5 risk factors
1. You don't understand how an option ARM works, but you have one anyway.
2. You exaggerated your income on your application.
3. You regularly have been making minimum payments.
4. You're approaching the principal cap.
5. House prices in your neighborhood are falling.
'"They're nightmares to the extent that people don't have them explained," Ohlbaum says. "I get calls all the time from people who say, 'I took this loan, I didn't understand it, my rate keeps going up. No one explained it to me."'
"In July, National Mortgage News reported that an unidentified lender took a random sample of 100 stated-income loans, looked at the borrowers' tax returns and discovered that 90 of the borrowers had lied. Thirty exaggerated their incomes by between 5 percent and 49 percent, and 60 borrowers had puffed up their incomes by 50 percent or more. Just 10 told the truth. The lender didn't say how many of these stated-income loans were option ARMs."
"Bottom line: If you lied about your income, you're more likely to find that you don't earn enough to pay your debts.
Personally, I think you already know this about yourself....
Watch the ABC video for How You Got Here...
'"Basically, what you're going to have on a lot of those pay option ARMs is you're going to see a lot of customers giving the keys back," says Mark Lefanowicz, president of E-Loan."
Don't Buy Stuff You Can't Afford!!!