Hi,

I am planning to buy a house of my own and have not been able to decide as to whether to go in for Fixed rate or Variable rate Mortgage. I have also heard of Adjustable Rate Mortgage Loans and would like to study about its suitability considering the other trends of the market. Would someone give me an idea?

Thanks!

Adjustable Rate Mortgage loans work best when you choose a long term loan.

Edited by mod due to spam.

When we bought our house almost 4 years ago, we had an ARM, at a very good rate. This kept us from having PMI as well.
When our 3 year prepay penalty was up, we refied with a 30 year fixed, right before the housing market crashed and the subprime mortgages took a dump! Thank God, because for some reason we are a risky mortgage(long story).
I would suggest anyone get a Fixed rate over an ARM anyday with how unstable the housing market is and the mortgages. We do have PMI ($144 a month) on our loan until it is at 80%, which will be awhile, but I feel safe having the fixed rate now! I would say ARMs are used now for properties you are planning to sell in 3-5 years. And the way properties are selling.......not such a great idea.

Honestly this is just my opinion from having an ARM.

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Jenifer M

Honestly, your best bet is to save up a sufficient down payment (at least 10%), and get a 15 year fixed mortgage. Look into that before you EVER look into an ARM. Especially with the market as it is. Those things scare the crap out of me.

I would also second choosing a fixed-rate mortgage. Mortgage interest rates have been low in recent years, but as history shows, they will rise. You may or may not be in a position in a few years to refinance an ARM.

DO NOT do a ARM. we did during the "rush" to buy 3 years ago and our payment went up 300 a few months ago and the interest can still go up 8 points before hitting our cap. we are trying to refinance now, we are already on a fixed budjet, if it goes up more we dont know what we will do. Please do not do that. you never know if you will be approved for a good refinace before the 2-3 years of it being "fixed". either do it fixed, or dont do it. We are in such stress now. it is ruinign our marriage, all we do is fight about money. we are under so much stress. Please do not do it no matter how "good" it looks.

We have an ARM right now. It is not a sub-prime ARM, though. The only way I would advise getting an ARM is if you know that you are going to move with in the time period. My husband is military and so an ARM is OK for us. This time though it looks as if we may be staying and we will need to refinance. This is the gamble you make with an ARM.

Rates are so low right now that I would only look at fixed rates. I have seen some fixed rates below 6%. That is incredible. I think it is a great time to buy right now. It is a buyer's market. If you have good credit, and you are going to be stable for at least 5 years I would buy.

I suppose this is more information than you wanted. I just found that if you are well informed then the better you are. Go to websites that compare all kinds of loans. Watch for the fees from lenders. I would try and go with the big lenders as they have fewer costs. Always remember the broker makes a comission off of you so hold your ground and get the loan that is best for you.

Hope this helps.

I used to work for a company that provided mortgages until a year ago when I became a sahm. I would NEVER reccomend an ARM unless you are planning on getting out of your home in a few years, but even then it's risky. I know when I left rates were going up and up. You have to be careful and read your contract some ARMs adjust every 3mts and some are once/year. Even if they go down. You have to check what the lowest your rate will ever go and what the highest it will go. We would close mortgages with an 18%max cap. Some people got that high and couldn't afford their payments. I would definatley go with a fixed since life is so unpredictiable. HTH.

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Mommy to Hope (10.10.06)
Monkey mommy to Allyson (10.13.02)

even if you plan getting out of your home in a few years I wouldnt recommend ARM. There are many many people now that "planned" that, and cannot sell and have been sitting on the market forever. Most of my family is in real estate and they say that nothing is selling, and if it is, rarely for profit. I hate california. we are so messed up

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Starting saving 12/13/07 using all my $1's and change