Sun Staff Report

Sunday, Sept. 23, 2007 | 7:30 a.m.

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When the Southern Nevada real estate market was white hot a few years ago, mortgage companies came up with creative financing plans that made it easy for individuals who lacked the normal financial wherewithal to jump in.

Subprime lending programs allowed some borrowers to obtain loans beyond their economic means - at least as measured by the usual yardsticks used to determine loan qualification - with no down payments and initial low interest rates.

Recently, however, the interest rates began to climb, and many homeowners were unable to make their mortgage payments. That led to an increase in foreclosures and a glut of homes on the market.

Here's what a typical homeowner might have faced with a $250,000, 30-year adjustable - rate mortgage :

For the first three years, he might have a reasonable fixed rate of 6 percent, resulting in a monthly payment of $1,499 .

After that, however, inflation and other financial factors could start pushing the rates up toward a ceiling of perhaps 11 percent.

If the rate rose 2 percentage points annually, within six years of taking out the loan, the homeowner could be making a monthly payment of $2,300 when the cap is reached.

That's $800 more than the original payment. And that's also why For Sale signs dot so many streets in the valley.