i am a first-time home buyer, looking for advice on what type of mortgage loan i should get. do i need a 30 yr. or would it be better to do an ARM. this is just a starter home and i don't plan on being there longer than 5-7 years.
2007-02-23 09:04:45 · 12 answers · asked by curious 1 in Business & Finance ➔ Renting & Real Estate
NEVER do an ARM. As soon as the thing starts adjusting, your transmission will go out, your dog will get sick & you'll lose your job. It's Murphy's law. Take out a mortgage at a fixed rate on a 15 yr note w/ a pymt that is less than 30% of your take home pay. Put as much of a down pymt as you can muster.
2007-02-23 09:09:45 · answer #1 · answered by Ryah B 2 · 0⤊ 1⤋
This is the exact reason ARM's can be appropriate for people. If you are confident you'll be selling the home in a few years, take an ARM that's fixed for 5 or 7 years, assuming you can get a lower rate.
Right now, the way the market is, however, a 5 or 7 year fixed ARM might only knock .125-.25% off your rate. That's not much savings. If you ended up there in year 8, you'd lose everything you saved and then some, most likely. And to say you'll just refinance at that time doesn't help, as that costs thousands of dollars too. You gotta be sure you're gone to justify it for that little rate savings.
So consider them, consider the risks, and decide what you're comfortable with.
2007-02-23 10:01:30 · answer #2 · answered by Yanswersmonitorsarenazis 5 · 0⤊ 0⤋
If you only plan on being there for 5-7 years, a 7/1 ARM would probably work well for you and save you about .25% in the interest rate.
The loan is amortized over 30 years and is fixed at the start rate for the first 7 years. At the expiration of that time frame the loan concerts to an adjustable rate mortgage.
Feel free to email me if I can answer further questions for you.
2007-02-23 09:13:13 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Wow there is some bad advice here. If you are certain you will be in the house for approximately five years.. take an ARM.
There just is no supporting logic to take a 30 year fixed rate when you can benefit for five years of cost saving lower payments with an ARM loan. You WANT to accept a two or three year prepay. You will get the lowest rate possible with a 5 year arm carrying a two or three year prepay penalty. These loans are designed for people in your situation.
If you decide to get a fixed rate I understand. Some people are willing to pay for safety. I personally prefer to take educated risks and save as much money as humanly possible.
I have been in this business for a long time. I personally would take the arm with a prepay if I was in your situation. But hey everyone has an opinon. I wise man told me once that opinions are like behinds. Everyone has one and they usually stink.
Good luck on your home purchase!
2007-02-23 10:19:15 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Do fixed-rate 30 yr loan. You still have to pay the least amount of interest and if you sell it after 7 years you'll make a bigger profit than ARM or something else. If the house is really cheap, you can get a shorter fixed-rate loan where you pay higher monthly fees but less interest is charged. Also when you move out you can rent it out and possibly get more income than expenses, and it would be easier to achieve this with a fixed rate than ARM.
2007-02-23 09:14:38 · answer #5 · answered by Stevv 1 · 0⤊ 0⤋
Real simple...You like money...If you really plan on a stay of less then 7 years..Take out a fixed rate mortgage...And do the math..can you afford 15 year loan..10 year loan...What can you afford?...The least amount of time = the most equity ....The shorter term will payoff the most princible..When You sell in 7 years..You'll have a lot more equity (money that has already been pay on pricible of loan)To get in your pocket when it sells..If all you can afford is a 30 year mortgage ...Expect very little princible pay off in those seven year...
2007-02-23 09:42:55 · answer #6 · answered by overhereyoupretty 3 · 0⤊ 0⤋
I'd go for an ARM, fixed for a few years, with no points. However, the rates on ARM's have increased of late, and it may be that a long-term fixed rate loan would have a lower APR. You should check www.mlcc.com, which is the real estate lending arm of Merrill Lynch; they have a panoply of different mortgages available, so that would be a good place to see what the options are.
2007-02-23 09:28:10 · answer #7 · answered by Anonymous · 0⤊ 0⤋
Since you cannot predict the future and 5-7 years can turn into 20-30 unplanned years.... FIXED RATE ONLY! If you do your research you will see the massive amount of foreclosures currently due to Adjustable Rate Mortgages. ARM's are a trap and a suckers bet. Fixed rates are at a good % currently. Protect your investment (and your cash).
2007-02-23 09:11:29 · answer #8 · answered by Chillyboy 3 · 0⤊ 1⤋
Ok do a 30 year with a 10 interest only loan. If you need any help before getting into a loan email me at seediaz@gmail.com or chris@pelicanlending.com with your scenario and I'll let you know whats out there.
good luck.
2007-02-23 10:49:20 · answer #9 · answered by 4walls 2 · 0⤊ 0⤋
Fixed rate with no pre-payment penalty - just in case you do end up staying and want to refinance. I like the security of knowing just what I will be paying and not getting shocked by an interest increase when I may be unprepared.
2007-02-23 09:10:03 · answer #10 · answered by justwondering 6 · 0⤊ 1⤋