Mellody Hobson: How an Adjustable Rate Mortgage Can Burn You

March 13, 2007 — -- The housing boom of recent years prompted many Americans to invest in their first homes and embrace the American dream.

Many who used adjustable rate loans to finance those homes like North Carolina homeowner Sharon Wright Jackson have had a rude awakening as their mortgage rates have risen.

When Jackson bought her first home in 2004, it was a dream come true.

"I was jubilant. It was one of the best times of my life -- second to giving birth to my children," Jackson said.

Today, however, that dream has turned into a nightmare for the widowed mother of two.

After doing considerable homework on the housing market, Jackson went with an adjustable rate loan to buy the house.

It seemed to be the perfect financing option.

"You don't have to put anything down," Jackson said. "You'll get money back at closing. You can refinance and pull money out in a couple of years and still keep the rate that you want."

After a two-year introductory rate of $769 a month, Jackson's mortgage payment rose dramatically.

"Per month, the payments can come up as much as $500 to $600 more," she said.

Today, Jackson's monthly mortgage payments remain in flux, leaving her to wonder how -- or whether -- she'll make ends meet for her daughters.

"One day, am I just going to look around and say, 'I just can't do it anymore? I can't hang on anymore? We may lose our house,'" she said.