"Hell is probably pretty crowded right now, but I hope there's a special circle reserved for lenders who make low-interest, adjustable-rate mortgages without adequately explaining how they work and what their drawbacks are. And I don't mean just handing you a written form along with the mountains of other paperwork you receive when you apply for a loan. I mean talking to you about what could happen under worst-case scenarios -- until you understand your risks clearly. Low-interest, interest-only loans and so-called 'option' adjustable-rate mortgages (ARMs) that allow buyers to make only minimum payments evolved over the last few years to deal with the 'sticker shock' buyers felt when they saw how much home prices were ballooning every month.
Now home prices have stabilized, while rising interest rates are causing sticker shock. In fact, the non-partisan Center for Responsible Lending says 97.5% of borrowers who have teaser rates expiring on loans this year could face 'payment shocks' of at least 25%, while three-quarters could face increases of 50% or more.
Incomes can't possibly keep up with these bump-ups. According to recent government statistics, real median household income has remained almost flat -- rising only 1.1% last year, to $46,326, from the year before."
If you need refinance information or a quote, contact me at my website.
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