I have written a few posts regarding Loans that are good for the broker and not the client, and here is some more.

Adjustable Rate Mortgages (A.K.A.) ARM's Are a great useful tool in Purchasing and or Refinancing, if they are utilized for the right reasons, I will list pro's and con's below for using an ARM, and getting a Fixed Rate..

- If you are a first time home-buyer, and your just learning the responsibilities of homeownership, then considering an ARM would be fine for you as far as money management is concerned. The variety of ARM's available can be suited to your financial status at the time of Purchase, Some ARM's available are,

1/1-  2/1 -  3/1 -  5/1-  7/1  AND 10/1  Also included in this should be the Pick-a-payment ARM's

If your going to get an ARM, then consider your employment situation now and in a few years, and then consider how long you may want to stay in your home, keep in mind that hopefully nothing changes with your work status but this is real life and things change, be prepared for the worse case scenario, so you don't end up losing your home with bad decision making. I think after a few years of being a homeowner you will be on your way in the right direction, having a good broker will greatly improve your chances of getting the right program for you.

- If your an existing homeowner, and your having some financial issues, then there are numerous ARM's that are available to you, the best reasons to consider these are, they usually come with a lower start rate which means a lower initial payment, these are usually band-aid loans, keep in mind, the lower rate and payment is only for a short time and will change almost certainly upward, if you have no intentions of changing your financial situation for various reasons, then stay away from these loans, they are not right for you. The idea of these shorter term ARM's, were to buy consumers some time to get caught up or adjusted to their new financial situations, these are not long term options and can be very dangerous if not used for the intended purpose. below is an Example of how a short term band-aid loan would work..

If you had a credit situation, and were told to take a 2/28 which are currently unavailable right now, for all intensive purposes we will still use it, this is how it would work, let's say you received a 2/28 2 Year Fixed and Adjustable for the remaining 28 Years, - If you got a Rate of 8% it would be Fixed for 2 Years and then it would Adjust as follows, - Rate will adjust 2-3% higher after the first 2 Years and then it will go up 1% every 6 Months after the change, with a stopping Cap rate or lifetime Cap of 6% so your rate can go from 8% to 14% in the life of that loan after the initial 2 year period. I think, if you would take a Fixed Rate you would be at Max 9.50% on this rate and it would never change. Keep in mind every Adjustable Rate Loan available, can come with different Caps and Adjustments..

If you are a Homeowner then a Fixed Rate is the safest way to go without any changes to your rates, now or in the near future..

- I have done plenty of research and it seems that ARM's have no rate bearing benefit right now, so I would strongly suggest a Fixed rate, if you can. It used to be that ARM's had lower rates compared to Fixed Rates but that's not the case right now, 15 Year mortgages were the same way having better rates, compared to 30 Year, but not in today's market, there are no rate benefits to using an ARM over a Fixed right now. 

So it's time to Fix that Arm!! it looks broken..

The bottom line is, everyone has their own opinion of ARM's and Fixed Rates, but a good broker will Point you in the right direction, if a broker is trying to sell you something and you just don't feel right, then click on Active Rain, and pull up a long list of very Reputable brokers who will gladly help you, don't feel forced to take a loan that is great for the broker and not for you..

Good Reading to everyone,

Thomas R. Weiss

Licensed Mortgage Consultant

tom@provagio.com