Refinance Mortgage

My fiance and I are trying to by our first house. Because we are not married yet the house and loan will go in his name until we are married. He has owned his own business for the past two years and because of his shows 0 profit on his taxes. Because of his taxes and being a business owner he is only eligible for stated income home loans at this time. We found a house and had a loan, we even have a closing date but we just found out a few days ago that our loan "no longer exists" (which was a 30 yr fixed) the bank has informed us that the only thing they have for us at this time is a 3 or 5 year adjustable rate mortgage at 8.73% interest rate. This loan is our last hope or we lose the house and get our deposit back. My question is should we do this 3 or 5 yr ARM? I’ve heard horror stories about ARM’s and I just need some advice. If we do this loan we can refinance in a few years and get a better rate for a 30 fixed like we want. I would appreciate any and all advice!! THANKS!!!
Well I am 5 years younger then my fiance and he’s making between $150,000-$200,000 a year and I’m making about $30,000. His credit score is also in the 700’s mine is in the mid 500’s because I don’t have as much history as him. The bank has told us the rate will either go up or down by 1% each year.

Do you have enough income that you could qualify in your name, and YOU could buy the house? And lots of people who aren’t married do buy houses together. Talk to the lender.

ARM’s can be a real bad deal if the rate goes up a lot when they reset, and it can do that. You might be able to refinance in a few years, but unless the income picture changes, probably not.

I have called my senators 100’s of times over the past 5 demanding that these adjustable rate mortgages be outlawed and they haven’t done anything. In addition, I want 100% loan to value ratio loans outlawed. We can thank the states of California, Michigan, Illinois, and Ohio for the current over-hyped foreclosure situation.

Stupid headlines like Foreclosures up 68% are misleading as hell. Less than 1% of all the home loans nationwide are even in foreclosure.

The U.S. had one foreclosure filing for every 617 households in November, RealtyTrac said. That is meaningless. During the attack on the United States oil industry between 1984 and 1992 one in five homes were posted for foreclosure in Texas and no one cared. Banks didn’t do anything to help.

I could care less how much homes have declined in California or anywhere else for that matter. Home values go up and down all the time. Rent homes and people who do not maintain they yards affect values more than foreclosures

The same reason that anything above 19% interest is no longer considered usury. No one cares, it’s all about the bottom line.

I’m a CPA but am not entirely sure how the mortgage brokering process works. I’ve received some sketchy information in the past indicating to me that the higher the rate is, the more of a commission the bank pays to the broker for bringing them the loan. I believe the exact terms are when the rate is above the bank "par rate". Now I’ve heard that if the broker brings the bank an adjustable rate loan that the broker receives and even higher Commission. Is this true?

Thanks,
Craig R. Fechter, CPA

It is true that the broker gets paid for an above par rate but not true that they are paid more for an adustable rate. The reason that some brokers and lenders for the matter push an adjustable rate is that it is lower than a fixed rate and "easier to sell". It’s unfortunate but many loan officers are just sales people and will sell what they think is easiest instead of what is best for you.