And it's an arm, even if her future income is that of an average nurse in the geography, if in 6 years interest rates increase the monthly payment will quickly approach 60% of her salary.
I feel like this point should be much higher than it is, and should be highlighted more clearly in the article. And the article doesn't even make it clear if this is a 5/1 or a 5/5, but it also absolutely leaves out the point that the rate won't just change after the initial 5 year period.
Non-conforming and no-doc loans weren't the only problem in the 2007s. ARMs were a big issue too because everyone thought they could refi before the initial period was up and that ended up not being true.
I bet she's counting on being a W2 employee in 5 years after finishing nursing school and refinancing into a fixed-rate. Not a terrible gamble, especially with her likely LTV of 66%.
Non-conforming and no-doc loans weren't the only problem in the 2007s. ARMs were a big issue too because everyone thought they could refi before the initial period was up and that ended up not being true.