My wife & I recently had a chance to catch up with an old friend. He had a pretty sad story to tell, with a combination of bad luck and unforeseen events. But he's a positive attitude type of guy, and he's able to see some silver linings around all the clouds. Here's the gist of it...
He bought his home in 2005. Like tens of thousands of others, this turned out to not have been a great time to buy. But prices were going up so fast, he and his family were excited to move up to a larger home before it got completely out of reach.
He financed his new home with an Adjustable Rate Mortgage. I've written before that 9 out of 10 people (or more) should use a 30 year, fixed-rate mortgage, but that for certain people in certain situations an ARM is an ok choice. Our friend is self-employed, and had been able to consistently grow his business. It wasn't unrealistic to think he could continue to expand over the next 3 years. Although hindsight is 20-20, it wasn't a terrible plan to think he would be better equipped to pay the mortgage when the interest rate adjusted upward in 2-3 years.
His business is service-based, and driven primarily by two factors: Residential homes selling, and/or Families having discretionary income. Unfortunately, the housing market and the ensuing recession did a 1-2 punch on his business.
Then, In 2007 he suffered a freak injury, which required surgery, and he was effectively put "on the shelf" for a few months. His income all but evaporated at that point.
Shortly after all this, his mortgage rate adjusted upward (as expected), and he could not make his mortgage payments. A few months later the bank foreclosed on him (and his family.)
The silver lining? He was able to find a home to rent which is similar to, and even a little bit larger than, the home he lost, and his rental payment is about $1,200 per month LESS than his mortgage payment was. He's healing, and his business is getting back on track. His credit is in bad shape for the time being, but he isn't planning on moving anytime soon. In a few years, his credit, his body, and his business will have all recovered, and he'll have the flexibility to decide what he wants to do at that time.
Best of luck, ______. You know we're pullin' for ya.
Your appreciates people who turn lemons into lemonade Realtor,
[tags] foreclosure story [/tags]