Setabay Private Hard Money Lender: The Risks and Benefits of Adjustable Rate Mortgages

The Risks and Benefits of Adjustable Rate Mortgages for Borrowers Seeking Arizona Home Loans with Bad Credit

Adjustable rate mortgages can be an attractive option for borrowers who have bad credit and are looking for different Arizona home loans programs. Knowing the facts about adjustable rate mortgages can help you risk less and make an informed decision.

Adjustable rate mortgages or ARMs are a type of mortgage that is offered by many banks and lenders. An ARM has a fixed interest rate for anywhere from 1 to 7 years, depending on the specific terms of the loan. After the initial term, the interest rate adjusts and increases above the prime rate. This will increase the monthly payment amount because the interest you pay each month has increased. ARMs have gotten a bad reputation in recent years as being dangerous and even predatory. Adjustable rate mortgages were in the hot seat in 2008, largely being blamed for the housing and foreclosure crisis.

Although they have been shown in a less than flattering light, adjustable rate mortgages can still be a good option for individuals looking for Arizona home loans and are especially good for borrowers who may have bad credit. Knowing the ins and outs of adjustable rate mortgages can help make them less risky and protect your investment.

Ways to Risk Less with Adjustable Rate Mortgages

If you are thinking about an adjustable rate mortgage as an option to help you secure Arizona home loans, it is important that you know all the facts. An adjustable rate mortgage will offer you a low monthly payment at first. This led many borrowers to over extend themselves and buy more home than they can afford once they have a higher interest rate. An easy way to avoid this Arizona home loans mistake is to closely examine monthly payments before and after the interest rate reset. You should be able to find out a cap on how high the rate could potentially go and what your payment will be at that rate. If you can afford the payment at the lower interest rate but not the higher one, it is safer to find a less expensive home.

Another way to minimize risk with an adjustable rate mortgage is to work with trustworthy real estate professionals. If you decide to refinance your home before your rate resets, you will need the home to be worth as much or more than when you bought it. An appraiser can help you make sure that you a making a sound investment. Also, a good real estate agent can help you understand housing trends and steer you away from areas of town that may be likely to lose value over time.

A third way to minimize your foreclosure risk is to sell the home before the rate increases. This can be an effective way to make money by fixing and flipping a property for profit. An adjustable rate mortgage will save you money on interest while you are fixing up the property, making the cost of ownership less. Just keep in mind that it is important to be able to sell the property for a profit when you are done. Make sure the home you buy is a sound investment, in a desirable area of town, and the work that it needs is within your budget and skill level. It does no good to end up spending more fixing up a home than you will make when you sell it.

Find a mortgage broker to work for you and get started on the process of qualifying for an adjustable rate mortgage.

Whether you have bad credit and it is the best loan you can qualify for, or you want to save a couple bucks on interest, an adjustable rate mortgage can be a good investment strategy. An Arizona mortgage broker can help you navigate the ins and outs of an adjustable rate mortgage and go over any additional information including down payments, current interest rates, and projected monthly payments.

When you are choosing a mortgage broker, make sure they have expertise in a variety of Arizona home loans products, including adjustable rate mortgages. A broker can be your most valuable tool in qualifying for a home loan because he will fight for you to be approved. He can even get lenders to manually review your application if underwriting rejects it. Find a broker you can trust today to start your journey towards homeownership or real estate investing.