Why is it easier for homeowners to qualify to purchase a larger house with an adjustable rate mortgage?
A)Because lenders tend to look at total interest costs in relation to household income in the first year of the loan.
B)Because lenders tend to look at total interest costs in relation to household expenses in the first year of the loan.
C)Because lenders tend to look at total interest costs in relation to household income in the first five years of the loan.
D)Because lenders tend to look at total interest costs in relation to household expenses in the first five years of the loan.
E)None of the above.

Question

Quizplus · Accepted Answer

With an adjustable rate mortgage, the initial interest rate is typically lower, which means the initial monthly payment is also lower. Lenders consider the total interest costs in relation to the borrower's income in the first year of the loan to determine if they can afford the initial payment. Therefore, if the initial payment is lower, it's easier for homeowners to qualify to purchase a larger house.

Why Is It Easier for Homeowners to Qualify to Purchase