Question:

Take a 30 year adjustable rate mortgage (30 year ARM) or a 30 year fixed rate mortgage (30 year FRM)?

Answer:

It is always easier to qualify for a 30 year adjustable rate mortgage (30 year ARM) than for the 30 year FRM. ARMs traditionally have lower rates and lower payments for the fixed period and lenders calculate the affordability of the loan based on the fixed initial rate. 30 year ARMs allow borrowers to get a house of higher value, compared to

Depending on how long the borrower would like to keep the house, they will choose when a 30 year adjustable rate mortgage will begin to adjust - after 1, 2, 3, 5, 7 or 10 years.

If your plans for staying in this house are for, say, 4 years, you could choose between a 3/1 or a 5/1 adjustable rate mortgage. The shorter the fixed period, the shorter the rate and the lower the rate adjustment caps.

30 year ARM Or FRM?

Decision to take a 30 year adjustable rate mortgage (30 year ARM) over the respective fixed rate mortgage should be based on sufficient risk calculations, taking into account different scenarios. In general, taking an adjustable rate mortgage is not recommended to first-time homebuyers. They will be much better off with an FRM and fixed monthly payments for the whole duration of the loan than risk a 30 year adjustable rate mortgage (30 year ARM) and a possibly huge increase in the monthly payment after the initial period expires.

On the contrary, experienced borrowers and investors could maximize their cash flow with an adjustable rate mortgage while an FRM will make them pay too much for the short time they plan to hold the loan.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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