Question:

How to avoid ARM mortgage reset shock?

Answer:

If you are an ARM mortgage holder, you are certainly willing to avoid a possible ARM mortgage reset shock. There are millions of people who made use of low rates and bought "more house" with ARMs they easier qualified for. But when the rate resets or is about to reset, people just find out how bad it is when the new statement arrives. They struggle with the bills for several months and then it is easy to lose their home once they are behind with payments.

Tips to Avoid ARM Mortgage Reset Shock

Read your mortgage agreement. Never take an ARM with prepayment penalty stretching beyond the reset date. If your ARM loan rate is about to reset in two years, do not accept a 4-year prepayment penalty. Your payment may rise with several hundreds and it may cost you $10,000 and more in penalty fees to the lender if you refinance.

Act preemptively. If you are yet to take a mortgage, make sure you attend loan counseling. Demand better risk disclosure from the part of the loan officer or broker. Ask about the worse case scenario where rates go up pretty quickly and use your reason to evaluate your real chances of improving your finances.

If you are already concerned about your mortgage payments, you could contact a non-profit national organization dealing with homeownership preservation and foreclosure prevention. The Homeownership Preservation Foundation, the National Foundation for Credit Counseling (NFCC), NeighborWorks America, and the National Urban League are examples of institutions dedicated to assisting troubled homeowners.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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