My wife and I wanted to share in the American dream, buy a house, raise a family, ect... So we saved up 40,000$ for a down payment on a house. I have a good credit score in the low 700's my wife's was even better, I have worked for the same employer for 8 years, and was making around 70,000 a year.
The house we choose cost 400,000, it was one of only 3 in the area we were shown by the Realtor, who we later learned only showed us houses he was listing.
I was told I only qualified for a interest only A.R.M. That was including the 40,000 dollar down payment.
The loan had a 21,000 dollar prepay penalty, so we waited for the 2 year term on our loan to expire and then get a conventional loan.
We had the house reappraised in July 07', in preparation for the refinance and found out the house was only worth 320,000 dollars. It turns out the 3rd bedroom in the house was illegally converted in to a master bedroom and would need to be brought up to code. Combine that with the current fact that all new mortgage lending was frozen for three months in the fall of 07', so we decided to sell at a loss of over 100,000 dollars in perceived equity, in addition to the 40,000 dollar down payment, and two years of paying a 2,600 interest only mortgage.
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