In case you have been in a cave for the past 2 years, the adjustable rate mortgage (ARM) has been unjustly blamed for the housing crisis. Here is the public perception of the ARM:
Borrowers were sold these new exotic Adjustable rates without the terms being disclosed, then they adjusted and the borrower could not longer make the payment and lost their home.
Is this true? partially. BUT , The ARM was not a new program, the ARM is not exotic or unusual, in fact the ARM is a great option for the right borrower. If you have over 20% equity in your home and you will sell within the next 5 or 7 years, and ARM is probably the right loan for you right now. WHY?
Rates as low as 2.875%! That is not a typo: 2.875% for a 5/1 ARM. You will have to pay 2.5 points to get there, but it is available.
How about 5/1 ARM 3.750% with NO POINTS? That is a full point lower than the prevailing 30 yr rate for today!
So why has the ARM taken such a beating? It was the subprime/Alt A stated income ARM that was the undoing of the mortgage industry. It was the Negative Equity OPTION Arm that pushed borrowers underwater. It was not the fact that they loan was an ARM that hurt us. Today, as a mortgage planner I offer ARM's to clients that can benefit from a ridiculously low rate with minimal risk. As a mortgage planner, I conduct a comprehensive interview and application with all clients to help them decide which product will best meet there needs. Call me today so we can figure out which loan is the right loan for you.