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ARM ends in July, what happens?

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demi
Established Contributor

ARM ends in July, what happens?

Just curious, I bought my house a little over 4 years ago, FHA, ARM, 5 years, 5.375 (it was over a point lower than the fixed rate).  Could have killed myself right after for doing this, but either way, would be wanting to refinance now with the much lower interest rates.   I paid $283,000, probably worth about 240,000 now (up from a low of about $170,000, definately going up in my area, 9000 down, have paid equity down to $255,000).    Looking to do a streamline refinancing in the spring, have one late payment last December, otherwise no lates on credit, do have a high usage which I am trying to pay down.  Credit scores in the mid 660's range, but hopefully as the late gets a little older and my balances go down, will lower.

 

If something happened that I couldn't qualify (nervous nini), what happens?  I mean, I know it can go up 1%, but realistically, would it?  Right now the current fixed rate for Wells Fargo (my lender) is 3.250.  I am also assuming there is nil chance it could go down!  I relaize my credit score is not a huge factor, but if I could do a little more repayment, would like to do.


Starting Score: EQ 679, TU 697
Current Score: EQ 680, TU 672
Goal Score: EQ 720, TU 720


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2 REPLIES 2
beb86
Valued Contributor

Re: ARM ends in July, what happens?

Try to GW the late first 

Message 2 of 3
Walt_K
Senior Contributor

Re: ARM ends in July, what happens?


@demi wrote:

Just curious, I bought my house a little over 4 years ago, FHA, ARM, 5 years, 5.375 (it was over a point lower than the fixed rate).  Could have killed myself right after for doing this, but either way, would be wanting to refinance now with the much lower interest rates.   I paid $283,000, probably worth about 240,000 now (up from a low of about $170,000, definately going up in my area, 9000 down, have paid equity down to $255,000).    Looking to do a streamline refinancing in the spring, have one late payment last December, otherwise no lates on credit, do have a high usage which I am trying to pay down.  Credit scores in the mid 660's range, but hopefully as the late gets a little older and my balances go down, will lower.

 

If something happened that I couldn't qualify (nervous nini), what happens?  I mean, I know it can go up 1%, but realistically, would it?  Right now the current fixed rate for Wells Fargo (my lender) is 3.250.  I am also assuming there is nil chance it could go down!  I relaize my credit score is not a huge factor, but if I could do a little more repayment, would like to do.


Look at your loan agreement.  I had an ARM on my last place.  It was conventional, not FHA, but it specified how they calculated the new interest rate.  Mine was adjusted annually, and tied to the LIBOR index.  IIRC, it couldn't go up more than 2% each year, and it was capped at 8%.  It most certainly can go down.  My ARM adjusted from 5.25% to 2.875% and then went up to 3% the following year before I sold it. 


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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