Adjustable
rate mortgages (ARMs) are making a comeback as lenders and consumers begin to
relax a bit after the housing bubble. It's important to note that ARM's,
in general, should not be considered a bad product and should not be confused
with the high risk loans that some lenders flooded the market with.
During
the housing bubble, some lenders encouraged low-income borrowers to take on
high-risk loans. Sometimes these loans were set up so that the borrower was
actually paying less than what the interest payment should have been. This
caused the loans to have a negative cash flow and the amount owed on the loan
grew. In addition, some of these loans were structured with risky
adjustable rate schedules which made it impossible for many to keep their homes
within a relatively short period of time.
The
truth is that a conservative ARM can be attractive, beneficial and manageable
in certain instances. A good lender will access your situation and if
applicable, may suggest an ARM to help you accomplish your goals. If that
happens, don't bolt for the door. Just listen to what he or she has to
say and then make an informed decision on the type of loan that will work best
for you.
One
scenario where an ARM can work well, for instance, is when a parent takes
a year or two leave of absence from work to stay at home and care for a child.
While the family is receiving one income only, it would make sense that
they would want a smaller house payment.
Another
reason to consider an ARM would be the length of time that you plan to keep the
property. If you are planning to sell within a few years, an ARM may be
the best choice for your situation.
To
be on the safe side, be sure to use a lender who has an established reputation
in your area. If you need a recommendation, I have several lenders that I've
had good success with and will be happy to share their names and contact
information.
Nancy Puder is a real estate broker with Nancy Puder & Associates in Arroyo
Grande, CA. If you have any questions or concerns regarding your
property, contact Nancy at (805)710-2415 or Nancy@NancyPuder.com She always
enjoys hearing from you! Follow Nancy on Facebook at www.Facebook.com/NancyPuderRealtor
and "like" the page to receive more insightful and current
information on the real estate market.
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