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By Marilyn Kennedy Melia CTW FEATURES More — but still a minority — of mortgage seekers are willing to gamble. The better they assess their personal risk, the less likely that they'll regret rolling the dice. In May, some 10% of borrowers opted to trade a lower initial interest rate on an ad- justable-rate mortgage (ARM) rather than take a higher rate that stays fixed for the life of the loan. The lower ARM rate (and monthly payment) only lasts for a specified period, such as three, five or seven years. Before approving borrowers for an ARM, lenders usually exam- ine whether their cur- rent income and credit profile will support a higher rate charge than the initial charge — often about 2 percent higher, explains Charles Chedester, of Iowa based Midwest Family Lending. Rate adjustments rise or fall in tandem with an index, which reflects where market rates are, but also are "capped" not to rise above a cer- tain limit. Annual hikes come after that first ini- tial period but are typi- cally more limited than the rise allowed at the first adjustment. Ask the lender to fully explain how, when and by how much rates can rise over the life of the loan, Chedester suggests. Also ask what rate is being used to qualify you. By underwriting at a higher rate, lenders are ensuring that borrowers will have enough money to keep their home. But the numbers a lender sees don't reveal what borrowers are plan- ning for their future. For instance, some- one planning to buy lots of furniture after mov- ing in or a buyer who'll need another car for his new commute should weigh if those payments will crimp their budget once rates tick up. A healthy fear of how easy it will be to pay should the highest- rate scenario occur is protection against being forced to sell due to unmanageable pay- ments. Be your own expert on whether an ARM will squeeze you out DL 1557865 ❏Design ❏ Build ❏ Install 4115Blackhawk PlazaCircle, Suite 100, Danville www.perpetualhomesadu.com It'ssimple,wedoeverything. PerpetualLuxBackyardHomes OurexperiencedADUteamdeliversfullturnkeyservice! TheHuntington:3bedrooms/2baths Gorgeousexpansivefloorplans TheNewportinteriorkitchenlayout More affordable than traditional site-built homes without compromising quality Improve your home's value & livable space with a modular detached backyard home. •Customqualitydetachedbackyardhome •Attractivebackyardcottages •Perfectforfamilymember •Increaserentalincomepotential From permitting, site preparation, foundation, utility connections and construction to final inspection. Permanent foundation. High quality at affordable price point. (925)980-2351 Call us to find out more about adding an ADU All-In Price Starting at $219,000* PerpetualLuxplansstartatapprox.540sf High-end finishes Homes | Advertising Supplement 001 BAY AREA NEWS GROUP H3