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Subprime & ARM – Too Often In The Same Sentence

It's been a tough couple of years for everyone.  Whether you're a lender or a borrower, the financial crisis brought about by indiscriminate and predatory lending practices is creating havoc throughout the world economy.It's true that a great many mortgages were issued to a large group of borrowers who really couldn't afford the home, or they didn't understand the problems that could come about when an Adjustable Rate Mortgage rolled over.

Unfortunately, the ARM has suffered as a credible mortgage vehicle by being mentioned in almost every article and news release that discusses subprime lending.  Subprime is really a simple and descriptive term describing lending to those who, for credit, employment or other reasons, do not qualify for the best and most secure loan products.  An ARM, Adjustable Rate Mortgage, is just that.  It is a mortgage with a rate that will adjust at the end of a specified period of time.  Unfortunately, a great many subprime borrowers were encouraged to take on ARMs in order to afford a larger home, or even because they wouldn't be qualified to buy at all with a long term fixed rate mortgage.

As a certified mortgage planner, I still help clients with ARMs, as they are a viable mortgage product when used properly.  There are many reasons why a borrower may not want or need a fixed rate long term mortgage.  Perhaps it's an investor who definitely plans on selling the property in less than five years.  There are other reasons, and any of them can be valid in the consideration of an adjustable rate mortgage. Let's sit down together and discuss your specific mortgage requirements, and make decisions based on knowledge, experience, and sound lending principles.

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