I had the opportunity to watch HBO’s version of “Too Big To Fail“, based on the book by Andrew Ross Sorkin. The book is about those few weeks in 2008 after Bear Stearns was sold to JPMorgan Chase, Lehman folded, and how Wall Street and the Government fought to save the financial system of the US.
The book and movie explain how they decided to bail out AIG, but not Lehman. It also talks about TARP, the Troubled Asset Relief Program, by which the Government provided “capital injections” in hopes of loosening up credit and money to the public.
I found it fascinating.
There are a lot of fingers to point and blame to be placed across the board for the bubble popping, subprime mortgage crisis that now forces so many foreclosures across the US. I’m not going to get into that, but I did have some takeaways from the film that I hope people will consider in the future:
1. Understand your loan options. ASK QUESTIONS. Find out the difference between a fixed-rate mortgage, an adjustable rate (ARM), interest-only, a balloon loan, etc. etc. Ask about an FHA loan versus a Conventional loan. Ask about the fees, both upfront and on a monthly basis. Based on your income, debts, and credit score, you should be able to find out which option is your best.
2. Ask for a breakdown of your monthly payment. Exactly how much will it cost you EACH month? Of course if you get a Fixed rate, your payment will only change based on your property taxes each year if you escrow them, but what about an ARM? How different will your payment be 5 or 7 years from now?
3. Will your property taxes be escrowed? Meaning, will you pay a monthly portion of the tax bill to your mortgage company each month so they can pay it on your behalf or will you be expected to make your property tax payment yourself?
The more questions you ask, the better educated you will be. You’ll be in a better position to make a decision on your own finances. Think of it like a doctor visit: once you get diagnosed, how many of you search out more information online? You want to know symptoms, treatments, side effects, etc etc. So why shouldn’t you research your mortgage options such as intensely?