Many of you might have seen that the housing market is going down all over the country and many people are defaulting on their loans because they cannot afford to pay their mortgages anymore. The reason why most people are defaulting on their loans is because they have an adjustable rate mortgage (ARM) loan. If you are not familiar with one of these loans, the basic principle is that you get a fixed interest rate for a certain period of time and then it is able to fluctuate up or down with the market after that point in time. The big issue now, with the market being so bad, is that the interest rates are sky-rocketing upward and people’s loans are too much for them to pay. Now, everyone has an option of refinancing before their fixed period ends, but many people do not or cannot afford the new interest rate. Many lenders provide ARM loans to buyers that they know will not be able to refinance at a smaller rate. This really keeps the buyers in a hole their whole life and this is why there are so many foreclosures in the US. People are going to have to stop going to crazy ARM loans and stick to the conventional fixed rate mortgage. Some may even have to live in an apartment instead of a house until they can get they money together to afford a house with a fixed rate. I would say that no matter what way you cut it, people have to be aware that they can pay a lot more per month and it can hurt them. Be aware of what you sign!