New blog article: Should I Get an ARM or a Fixed-Rate Mortgage?

[Elizabeth_FICO]

Hello everyone! If there's a new blog article that I think you guys might like I plan on posting it in the Forums.

This week's article is: Should I Get an ARM or a Fixed-Rate Mortgage?

Let me know what you think about the article.

For more content don't forget to check out our blog.

[Revelate]

I'd be curious to get one of the LO's opinion but my understanding is ARM vs 30 year are basically the same interest rate except for it's cheaper to buy points on the ARM.

ARM rates weren't great currently, more expensive than the 30 year with the two lenders I checked but that's probably not surprising since the market doesn't expect this rate environment to last forever and would rather pick up a refinance down the line than not.  

[ShanetheMortgageMan]

It's true that you get more bang for your buck when paying points to buy down a rate on ARM's vs. fixed rates.  A lot of lenders ARM rates will be nearly identical to their fixed rates too, but I've seen some banks offer much lower ARM rates than their fixed typically to borrowers who have high liquid net worth (in an effort to get them to switch over who they bank with).

[Caught750]

There was a sweet spot where ARMs were a good choice.  Rates were a bit lower and points had more impact.  Buy Downs are another option in the short term as well.

Fannie said they anticipate rates in the 4s by the end of 2023 and Barry Habib had the same opinion.  With that in mind it's going to be buyer specific but there are a few options

1) take a high rate and Lender Credits knowing you'll refinance in a year

2) do a buy down; if your rate is 6% and you use a 3-2-1 buy down you'll have a payment with a 3% interest rate in the first year, 4% in the second, and 5% in the third.  In year 4 you'll pay the full 6%.  Refi before you get to year 3.

3) during the ARM sweet spot window do an ARM expecting to refi into a 30 year fixed before the rate adjusts.