By Victoria Loustalot

Dare to Bare

Everyone's talking about the troubles in the mortgage market, but what does it all mean — and how will it impact you? In essence, rising interest rates have caused a spike in mortgage payments, and homeowners are now feeling the pain. We spoke with Diana Olick, a real-estate expert and reporter for CNBC and Stacey Bradford, the associate editor for Smart Money, who shared their insights into the problem and tips to help you protect yourself:

The Basics

  • This does not affect everyone
  • Individuals with a shaky credit history who need 90-100% financing will be impacted the most
  • If you have good credit and are in a position to put at least 20% down on a home, you shouldn't have difficulty securing an ARM or fixed-rate loan

Be Aware
  • Proceed with caution if you're considering an ARM: Lenders are now qualifying borrowers at the fully amortized rate of the loan, not at the initial rate
  • If you're stretching a bit to get into a home, and your credit is less than perfect, you will now have a harder time finding a loan, and it will cost you a lot more than it would have in the past

If You Already Have a Mortgage
  • If you have a fixed-rate mortgage, just keep paying
  • If you have an adjustable mortgage, check the adjustment date and get ready to pay a bit more
  • If you have a loan with a lender who went out of business, that loan is picked up by some other lender, so it all stays the same

If You Want a Mortgage
  • Get a fixed-rate mortgage, if possible
  • It's risky right now to take a chance on an ARM or an interest-only rate

Remember These Tips
  • Read your paperwork! If you don't understand it, find someone who does
  • Now is the time to be conservative
  • Do not buy more house than you can afford
  • Avoid the worst-case scenario: You don't want to borrow against your home and end up owing more on your mortgage than your home is worth

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