Story after story talks about how homeowners, who are attempting to modify their adjustable interest rate home loans to lower their payments, are now watching their monthly payments skyrocket.  

Please don't get an adjustable rate mortgage (A.R.M.)!  

I just read a story about a couple in AZ with a $550,000 home and they are trying to get a loan modification, because their interest rate is going to adjust (UP) to over $1,000 more per month.  Most Americans cannot afford a jump in monthly payment like that.  

When you are looking to purchase a home, only apply for a fixed interest rate mortgage.  An ARM will only hurt you in the long run.  If you have to get an ARM to buy a home, don't buy it! ARMs are only a viable option for very few homeowners, yet during the years of 2003 - 2007 in a hot seller's market, many people got ARMs, because that was the only way to afford the home they wanted.  

Now I'm not here to place blame.  There's enough to go around for everyone, but the fact of the matter is if you can't comfortably qualify for a 30 year fixed rate mortgage on a home that you want, then you need to move down in price.  The Financial Peace University Guy, Dave Ramsey, even talks about only taking out a 15 year mortgage.  

You also need to remember that your total mortgage payment of PITI (principal, interest, property taxes & homeowners insurance) will go up from time to time, because even though your principal and interest are fixed, your taxes & insurance will increase over time.  

So, when deciding on how much home you want to buy, make sure that you review your housing goals, stay within a comfort range for your monthly payment and don't buy a home that will keep you home all the time, because you won't have any money left over to enjoy life.

At your service,

Dan

What questions do you have? I'll gladly answer them at: dan@danweis.com.

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