Credit Card Center Advertiser Disclosure

New Visitor
Posts: 3
Registered: ‎07-11-2009
0 Kudos

FHA 5/1 ARM?

Been approved for a 30 yr fixed FHA mortgage, but while filling out my loan app today I asked about the possibility of an FHA 5/1 ARM.  The loan officer did not take kindly to this question, and proceeded to lecture about what a bad idea this was and how rates are historically low and if I couldn't afford the 30 yr fixed rate, I shouldn't be getting a home loan.  He flat out refused to do an FHA ARM of any sort.  I know that given the recent housing meltdown, ARM's got a bad name... but are they completely taboo now?


For my situation, I think it's a very good idea.  It's not that I can't afford the 30 year fixed rate, I just think the ARM would be better for my situation.  I plan to be in the home 10 years tops before moving.  My income should increase gradually over the next 5 years while the initial rate remains locked.  I have a few other small payments that will be paid off in 3 years, freeing up more of my income if rates were to rise.  I know rates have nowhere to go but up, but I seriously doubt we'll be seeing more than 2-3% increases over the next 10 year period.  The economy just seems to fragile to sustain interest rates from the late 70's, early 80's era even with 5 or 10 years to recover.  Even if rates rise, the balance will be lower by then and the rate increase wouldn't hit as hard.  And lastly, with about a 1% lower rate for the next 5 years I could absorb some increase without being any worse off than paying the additional cost of the fixed rate for the first 5 years.


This was a local bank who had this bad reaction to the thought of an ARM, and 3 other local banks said basically the same when I called to see if they would do an FHA ARM.  Chase is the only bank that seemed to react positively to the idea, but overall their fees, rates are not competitive with the local banks.  


On the subject of rates, about 2 weeks ago my LO quoted an FHA 30 year fixed at 5.375.  Last Friday it was up to 5.5.  Now today, that I was approved and can lock in he gave me 5.625.  I'm going to give it a few days and see how rates behave I think.  I know rates have risen slightly over the past week, but from what I've read 5.625 seems a little high currently.  Purchase price is $129k.  Any thoughts on any of the above are appreciated.



Super Contributor
Posts: 7,915
Registered: ‎07-03-2007
0 Kudos

Re: FHA 5/1 ARM?

your thinking is sound..... but the math isnt

cant really save enough money with the lower rate to cover the closing costs on your more than likely refi.

maybe at $200 - 250K the math would make more sense.


5.625% is a bit on the high side. but the lower loan amount may be driving that some too.


you could do 3/8ths better and the lender would STILL be making plenty. Unless this is a 0 origination fee loan. then that rate is right



* While I try to visit the forum often, please feel free to contact me directly with a link to your post if I fail to answer a follow up question.

* Lending across the entire 'Great State of Texas' (and now Louisiana)since 2004

* The Loan Officer who you can call anytime... and answers your questions Nights & Weekends

Valued Contributor
Posts: 1,464
Registered: ‎07-29-2008
0 Kudos

Re: FHA 5/1 ARM?

The bank may not offer a 5/1 ARM and so they were reacting to the possibility of losing your loan?
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Brian B The Loan Professor
Mortgage Banker - offering FHA, VA, USDA , and Conventional mortgages in all 50 states -

If I do not respond to a follow up question please feel free to contact me directly

Forums posts are not provided or commissioned by FICO. Forums posts have not been reviewed, approved or otherwise endorsed by FICO. It is not FICO's responsibility to ensure all posts and/or questions are answered.

† Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
‡ Credit cards for FICO Score ranges: The score ranges are guidelines based on internal myFICO analysis of actual applicant approvals, and having a FICO Score in a particular range does not guarantee you will be approved for credit cards recommended in that range. These ranges were not provided by any card issuer.

* For complete information, see the terms and conditions on the credit card issuer’s website. Once you click apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While myFICO always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.

Copyright ©2001-2015 Fair Isaac Corporation. All rights reserved.   | Terms of Use | Privacy Policy | Sitemap

IMPORTANT INFORMATION: All FICO® Score products made available on include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.