The rich red tones that warm every room first drew Rene and Barbarella Diaz to the West Paces Ferry Road house they now call home. They loved the den with its bank of windows overlooking the pool and the French Provincial air of the kitchen.

And with creative financing, the Diaz family had no problems covering the $1.6 million purchase. They chose an adjustable rate, interest-only mortgage — an option that will let them live in more house for less money. The option also fits with their grander plan: to sell within seven years so they can build a custom home.

"You need to attack it from a business perspective," said Diaz, president and CEO of Diaz Foods. "And align that with your personal goals."

In Atlanta's luxury home market, some buyers have the wealth to pay cash for their homesteads. Many more, however, are stretching their housing dollars by using creative financing, banking on a strong economy and a steady paycheck.

These new financing techniques are a good option for some, like the Diazes, who manage their budget carefully and have ample resources to balance their risk. But experts see others using creative options to buy pricey houses they can't really afford, putting themselves in a precarious financial gamble.

Wes Vawter, a real estate agent in Atlanta for 23 years, said his trade in $1 million homes has changed dramatically in just the past six years. In May alone, Vawter said, his team sold six homes totaling almost $10 million. And contrary to previous years, most of those homes were financed, he said.

"People are getting younger and younger buying these expensive houses," Vawter said. "They want it all now."

High-priced housing

Many homeowners are also finding it's easier to purchase high-end luxury homes in metro Atlanta because they're transferring from other regions of the country with inflated real estate prices, said Lawrence Yun, senior economist with the National Association of Realtors.

"They're selling expensive homes in New York, Boston or Washington, D.C.," Yun said, "and coming to places like Atlanta, Orlando or Tampa" where their housing dollars will buy a lot more.

Baby boomers, in particular, are taking advantage of cross-country moves to purchase their retirement homes in metro Atlanta, cashing out houses in hot real estate markets and then plowing the money back into their homes here.

And strong equity gains from our own real estate market are allowing some homeowners to purchase their "dream house," Yun said. Metro Atlanta's robust economy is also helping more home owners qualify for a million-dollar address.

The region ranks sixth among cities nationwide for expected growth in the number of households that can afford to buy a $1 million residence, according to a recent survey by the California-based Claritas research firm for Merrill Lynch and Capgemini.

Currently, more than 60,000 households have assets that top $1 million, excluding the value of their primary residence, according to the study. But that number is expected to grow by more than 68 percent over the next five years.

And this, analysts say, will keep demand for high-priced housing strong — despite slowdowns in other real estate markets nationwide.

Innovative financing

Real estate professionals and bankers agree that the bulk of million-dollar homes are being financed with new options such as adjustable or interest-only loans. Adjustable rate and interest-only loans open with several years of lowered monthly payments which then increase after a specified term.

They also comprise one-third of Atlanta's mortgage market, according to bank surveys.

These mortgages can put as much as 40 percent more house into reach, according to Yun. For example, where a traditional 30-year loan at 6.25 percent interest would result in a monthly mortgage payment of about $6,791 for a million-dollar home, an interest-only loan could generate a monthly payment of about $6,032.

Of course, the downside depends on the owners' perspective. With an interest-only loan, the principal continues to loom.

"In seven years, I'll still owe $1 million," Rene Diaz noted. But for the Diazes, the strategy is more about timing and not investing more money in a house that they know is not their last.

And they're not alone: The short terms of lower payments often appeal to executives with large corporations who have been transferred to Atlanta as a transition to another assignment elsewhere. Lower payments mean they can buy a larger or extremely well-appointed house knowing they will sell it before the payment increases.

"I'm not putting money down into an asset," Diaz said, "when I can take that money and invest it."

Flexible loans also appeal to people whose cash flow fluctuates, said HomeBanc Vice President Gary Welch. Sales executives who work on commission or consultants who work by contract, for example, can pay down the loan's principal when their finances are flush, and make only minimum payments in leaner times.

"It's for the person who's disciplined," Welch said. "It's a strategy."

Loan danger

The dangerous side of such financing is that big, easy mortgage money can lure some homebuyers into a budget-balancing act, where any dip in income — job loss, illness, divorce — could result in financial crisis.

"No one has ever accused the American spender of being overly prudent," said Roger Tutterow, dean of the Eugene Stetson School of Business and Economics at Mercer University.

Experts say such buyers are vulnerable to being stretched too thin.

"You have individuals and families borrowing the most they possibly could, so they have no cushion in cases of reversal of fortune," said Frank Alexander, interim dean at Emory Law School and director of its Project on Affordable Housing and Community Development. Even a rapid rise in interest rates can pinch the holder of an adjustable-rate mortgage once the introductory period is past.

For most, conventional fixed-rate mortgages are the best way to go, Alexander said — unless the borrower's assets include substantial untapped savings or investments.

Simply put, he said, "To afford a $1 million house, you need between $250,000 and $350,000 in annual income."