After Being Outbid twice last year on homes in the charming Old Town section of Alexandria, Va., Adam Brake decided to go for broke. The 40-year-old U.S. Army attorney offered $11,000 more than the asking price for the next property he liked. He got the house, but could put down just 5% and needed both an adjustable-rate mortgage and a fixed-rate one to finance the $340,000 purchase. For now, Brake can handle his monthly payments, but he could end up paying a lot more if rates rise, something that leaves him a little uneasy. "Every time the Fed meets to discuss raising rates, I cringe," he says. Just when it seemed that everyone who could afford a house had bought one, banks are devising ever more exotic ways for Americans to purchase their first homes or trade up to fancier ones. A record number of Americans already own a home, but the new loans―which usually require lower monthly payments at first―have kept the housing boom going full blast just as rates seemed to bottom out over the past year.
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