Atlanta Borrowers Taking Out Adjustable Rate Mortgages Again
Have adjustable-rate mortgages gotten a makeover? Lenders say the ARMs that once contributed to the housing market crash may now be an affordable option for Atlanta home buyers.
Back in the 90s, adjustable-rate mortgages made up the large majority of home loans. The problem was, many of these loans came with risky perks intended to lure borrowers - whether or not borrowers could afford them.
Some ARMs allowed for homeowners to defer making their full interest payments, leaving them with an unmanageable balance later on. Others adjusted to new, usually higher, rates every six months. Understandably, many people ended up defaulting on loans, kicking off a wave of foreclosures. By 2009, adjustable rates made up just 2 percent of all home loans. Now, they're on the rise again.
Lenders are trying out a new kind of ARM. Today's adjustable-rate mortgage come with a low interest rate that is fixed for five to seven years - often longer than some people stay in their homes. When the rate does begin to adjust, it only does so annually - and up to a capped limit, so borrowers won't get stuck paying more interest than what they qualified for.
But while today's ARMs might be easier to afford, they're also harder to come by - which is actually a good thing. Banks have tightened up lending standards to make sure borrowers don't default. In order to qualify for an adjustable-rate mortgage, you'll need to show you can afford payments at several points above the initial fixed rate. It might seem like a lot to ask, but it's better to not have a home loan than to have one that wreaks havoc on your finances.
But just because you can't qualify for a home loan now, doesn't mean you're out of the running. If having too much debt is to blame for your lack of available income, you have options - the best of which may be bankruptcy. Bankruptcy can eliminate debt, freeing up cash for your mortgage, utilities bill, groceries, gas, and more. So you can start rebuilding your credit and applying for that home loan. Wondering if bankruptcy can do wonders for your finances? With a no-cost personal debt analysis with a qualified Atlanta bankruptcy attorney, you can find out for free.