is it easier to qualify for an ARM than fixed rate mortgage?
Posted by admin | Under Fixed Rate Mortgage Wednesday Oct 29, 2008if not then why do people take out arms, everywhere i read says dont do that under any circumstances, is this just bc the people dont know any better?
The qualifications are just about the same.
If you believe that you will be reselling the house within three or four years or you think that interest rates will be going down over the next few years then an ARM might be a great idea.
That may not be true right now for you but it might be true 10 years from now when you buy your next house- so rule like "under any circumstances" don't really hold true.
The qualifications are just about the same.
If you believe that you will be reselling the house within three or four years or you think that interest rates will be going down over the next few years then an ARM might be a great idea.
That may not be true right now for you but it might be true 10 years from now when you buy your next house- so rule like "under any circumstances" don't really hold true.
References :
ARMS typically have a lower introductory rate, and therefore a lower payment, so they are easier to qualify for.
The trouble starts after they adjust, because then the payments rise, creating a problem for people barely qualified at the intro rate.
The conventional wisdom has always been that they are riskier for that very reason, but during the boom period people rationalized that they could refinance or sell out of them. When the market cooled off, the trouble began.
References :
real estate broker
loan officer
Yes, it is (or was). That's one of the reasons so many people got in trouble.
References :
The qualification process is the same. ARMs serve a very good purpose when they are in-line with the particular borrowers financial situation. If you are familiar with life insurance policies, think of it as permanent and partially permanent policies. Your monthly premium for the permanent policy is higher but if you cannot afford it and/or you do not need it, you get the cheaper plan. These days, the average rate difference between a 5 year ARM and a fixed is about 1% which in monthly payments, could translate into a considerable difference depending on the size of the loan. So, it all depends on the particular financial situation. Bear in mind that if one has an ARM mortgage, they can always pay a little more and have it applied to the principal and/or save the difference in a tax deferred annuity of some sort. All in all, there is something for everyone depending on individual circumstances. Hope this answers your question.
References :
Licensed CA broker