A local credit union in my area offers a 0% down 10/1 ARM amd 7/1 ARMs, both with lender-paid mortgage insurance. I have a 665 mid credit score and was quoted an interest rate of 4.6% for the 10/1 ARM and 4.3% for the 7/1 ARM.
I had been considering Navy Federal's 0% down program but the rates for me are astronomically high in the neighborhood of 7%. Now I'm leaning towards an FHA loan, but being able to put zero down is very attractive to me. The payments would be similar for both the FHA and 10/1 ARMs.
Is it worth me considering one of these hybrid ARMS? The following factors are making me think this might not be a bad idea for our situation:
1) In 10 years, there is a good chance we would have either moved or refinanced the loan.
2) We live in an area where housing prices appreciate rapidly and handle downturns very well so we should be able to refinance the loan easily.
3) In 10 years, barring some sort of disaster, our income should be substantially more and our expenses substantially less, so we should be able to easily handle the increased payments if worse comes to worse.
I put in my app for the Navy Federal loan and now I'm about to check out these loans. I appreciate any thoughts on this.
If I could get an ARM that made a material difference in the amount I was going to pay on my mortgage, as soon as I got two paystubs behind me at the new gig I'd apply for it. Unfortunately, I can't at least at recent check, but I'm not going to suffer badly on my 15 year 3.25% even if that was a mistake looking back at it.
I would significantly caution on the refinance bit: unless you plan to do it soon, you may be refinancing at a non-trivially higher rate... I don't personally think they're going to skyrocket, but that's nothing to take to the bank.
It's not a terrible deal just make sure you know what you're getting into is the only caveat, my backup plan for the ARM I was looking at was simply to throw all my free cash flow into paying off the mortgage or at least paying it down to some balance where the increased APR was going to be negligible... if your income is going to be increasing or you're buying cheaper than you can afford, that might be applicable to you as well.