Fico min. score for 5/1 ARM

[Anonymous]

My mortgage broker is telling me that if I want to explore a 5/1 ARM due to my Fico score of 648 interest rates would be much higher than a conventional 30 year loan. Is this accurate

Message Edited by NewhomeHouston on 04-30-2008 08:37 PM

[ShanetheMortgageMan]

The 5/1 ARM rates are a bit lower than a 30-year fixed, however the price of mortgage rates gets less cheaper as they get higher on a 5/1 ARM... vs. get more cheaper as they get higher on a 30-year fixed.  A little complicated to understand, but what it means is that if you paid a few discount points on a 5/1 ARM your rate would be lower than if you paid a few discount points on a 30-year fixed... however if you didn't want to pay any/not much discount, then a 5/1 ARM would have higher rates than a 30-year fixed.  Further, if you go FHA, you'll have a spankin' good interest rate on a 30-year fixed with your scores, vs. going conventional 5/1 ARM you'd have the rate increase due to the 648 mid score.

Why are you looking for a 5/1 ARM?

[Anonymous]

Thanks for the response Shane.

I am looking to get the lowest interest rates - short term.

I asked my (new) broker for alternative options, i.e. interest only payments and 5/1 ARM. The response has been that due to my FICO scores 648 ( which I felt was decent) the best and only way is conventional.

I don't think I qualify for an FHA loan, this is not my 1st home purchase and I believe our combined (wife and my)  income is higher than needed to qualify 120k. Am I wrong??