| AN ARM (Adjustable Rate Mortgage) has | | | | if the interest rate increases. |
| several disadvantages, and they should | | | | If you plan on being in your home for |
| all be considered before going into a | | | | over 5 years, the best bet is you want |
| home loan deal with this specific | | | | to build equity into your home, which an |
| program. If you are on a tight budget, | | | | Adjustable rate mortgage's low payment |
| then is definitely not for you. Payments | | | | plan prevents you from doing. |
| can increase month to month. | | | | An Adjustable Rate Mortgage is best if |
| Payments can vary month to month by a | | | | you are planning on just investing in |
| couple of hundreds of dollars to | | | | your home, and don't plan on staying in |
| thousands, depending on your program. | | | | it for more that 5 years. You are |
| Your rate is adjusted with inflation. | | | | gambling that the home values will go |
| That means when the FED increases their | | | | up, and you can cash out before the |
| rates... your payments go up, up up! | | | | program comes due. Millions of people |
| The only way to really win in an ARM | | | | have try playing this game, and you |
| program is to pray that interest rates | | | | really don't want to. The simple fact is |
| go down, WHILE your home value goes up. | | | | that the financial game is not to be |
| History has show these two events rarely | | | | played with when you consider it is your |
| occur at the same time. On one hand if | | | | family's financial stability that you |
| your home values are going up, that mean | | | | are gambling with when you choose an ARM |
| sellers are selling at a higher rate, | | | | home loan program. Think long and hard |
| and buyers are getting hit hard with | | | | on how you are going and calculate if |
| fees and high interest rates since it is | | | | you will be able to financially pay a |
| a seller's market. If interest rates are | | | | monthly varying payment. |
| going down, that means there are more | | | | Another disadvantage of an ARM is that |
| buyers out there than there are sellers. | | | | you can not set a proper financial |
| This in return drives home prices up. | | | | budget for you and your family. Since |
| Well that's your idea goal right? Wrong. | | | | the next monthly's payment is going to |
| Notice I said home prices, not the value | | | | be a guess you could find yourself in |
| of the homes. If you are buying a | | | | deep water, in cases of emergency. It is |
| $600,000 home, in a neighborhood that | | | | very difficult to create a long term |
| the average value is 400,000, guess | | | | financial budget on an ARM home loan |
| what, you're paying too much. Now if you | | | | program. |
| are the seller you are skipping to the | | | | If you are on a tight budget your best |
| bank with your extra money, but if you | | | | chance is to explore a fixed mortgage |
| are a buyer you will soon find that you | | | | rate. Most borrowers feel comfortable |
| paid too much for your home, once home | | | | with a simply easy predictable monthly |
| values level off. | | | | mortgage payment. |
| A huge problem that most borrowers have | | | | There are several only resources that |
| with an ARM is the 5 year surprise. | | | | can help you find a perfect low fixed |
| What's the 5 year surprise, well when | | | | mortgage rate. Do your research. Make |
| you sign a traditional ARM, you pay as | | | | sure the company you are dealing is with |
| little as possible for the first 5 | | | | the Better Business Bureau, A rating |
| years, and no FED interest rate is | | | | with the BBB, and are reputable. |
| calculated. Then after 5 years, the | | | | Currently it is time for home owners |
| Adjustable Interest Rate program starts, | | | | with ARMs, and even fixed rates to start |
| and now your monthly mortgage payments | | | | shopping for a new lower fixed mortgage |
| include the FED's interest rate. So you | | | | rate. Overall mortgage applications for |
| can potentially be seeing quadruple | | | | ARMs have declined; they have reached |
| monthly payments, and your payments can | | | | their lowest point since 2003 of March. |
| continue to increase month after month | | | | |