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Welcome to STop, the Seattle Times Opinion blog where our editorial writers and editors share their evolving thoughts on a variety of issues. STop is a place where opinion writers and readers can exchange views and readers can learn more about how editorial positions are formed.

The opinions you read below are those of the individual writers, not necessarily views that will become formal positions of The Seattle Times. Respond to STop
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Currently, STop cannot automatically post readers' comments on the blog. However, the editorial staff will regularly post readers' comments. Your comments are sent directly to the individual editor or writer.

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Jim Vesely
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Jim Vesely
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Lee Moriwaki
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Lee Moriwaki
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Joni Balter
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Eric Devericks
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Lance Dickie
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Bruce Ramsey
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Kate Riley
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Lynne Varner
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Ryan Blethen
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June 22, 2005

Interest-Only Loans and the Price of Housing

In reply to my blog on interest-only loans, a Seattle reader writes:

Interest-only loans allow people to buy a much more expensive house than with a traditional 30-year mortgage. Although this is good in one regard, since it allows more people to enter the housing market, it has also been one of the reasons for the dramatic increase in local prices... The pool of people buying any given price range has increased abruptly. Although this might seem like it would allow more people to buy a home, one of the unintended consequences is that the price of housing has gone up. This is happening because there are now more people chasing after the same properties.

For example, if you have two people with fairly modest incomes of $35,000 each they would qualify for an interest-only loan of up to $450,000. This is almost seven times their gross income. The traditional rule is between 2 and 3 times gross income.

Respond to this reader.

 
Posted by Bruce Ramsey at June 22, 2005 10:19 AM



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