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I just bought my first home. Now I need a loan. I know nobody can predict the market, but what’s your opinion right now? Do you think the market will continue to go down over the next, say, five years? or do you think interest rates will rise sooner? Just looking for others opinions. Please explain why for me, as answering “get an ARM” or “the market is going up” doesn’t really help me or anybody else in my situation who happens to come across this post! Thanks everybody!
Okay, so I don’t technically own the house yet. I negotiated a price, came to an agreement with the seller, and we both signed the contract. We close in a month and I’m pre-qualified for various loans. I was taking this opportunity to explore my options while I still could.

Second, I can comfortably say there is less than a 25% chance I will live in the house more than 6 years due to various factors (school, work, etc.), but as they say – the best laid plans… If everything goes according to planned, the longest I will own the property is 5 to 5-and-a-half years.

Finally, credit score is (thankfully) not a limiting factor for my situation.

Thanks for all the help so far! There’s been some great advice!

5 Thoughts on Just bought a home – fixed or ARM loan? your opinion…?
  1. Reply
    August 16, 2011 at 5:17 am

    Fixed, fixed, fixed,,,, I’ve bought several homes and lots…If it ever really does goes down, you can always refinance lower. Make sure you get a mortgage That you specify “no pre-payment penalty” (no fee to pay off or refinance early) and take the loan for as FEW years as you can handle OK. The difference you will pay in interest between a 30yr & 15 yr mortgages is mind boggling, but usually not really too much more a month. So far, I’ve only had 1 30yr, the rest sucessful 15yr ones…all FIXED…some refinaced again fixed at a lower rate. Don’t expect lower rates to happen, that’s not luckly, or very very short termed.. Hope that helped..Good luck

  2. Reply
    August 16, 2011 at 5:55 am

    Fixed rate loan is the way to go.

    Go with a standard loan – fixed rate home loan. Interest rates are still low – so lock your rate in now.

    The whole “mortgage crisis” is because people bought homes they could not have afforded had they gotten a standard home loan. So, they had to get crazy hybrid, interest only, balloon payment, negative amortization, arm loans. Then when the interest rate re-set (easily doubling their payment) they could no longer afford the home and it was foreclosed on.

    Fixed rate is the way to go.

  3. Reply
    August 16, 2011 at 6:45 am

    I just bought my first home. Now I need a loan.

    If you don’t have the loan yet, you have not actually bought the home. You actually buy the home when all the paperwork is signed at closing.

    NO ONE can accurately predict what the market will do over the next year, five years, or any other time frame. I CAN say that interest rates are currently near their 30 year lows. They have been in this range for quite a while. It odds of rates going up or much higher than the odds of rates going down. Also note: most ARMs have a ‘teaser rate’ the first year. That means interest rates would have to DROP just for your rate to stay the same after the first adjustment.

  4. Reply
    August 16, 2011 at 6:56 am

    fixed, you need stability in these times of need

  5. Reply
    August 16, 2011 at 7:56 am

    There are several things to consider to help you decide.

    1st, ARM loans are usually fixed for a specified period of time, like 2, 3 5, 7, & 10 years. If this house is a place you don’t think you’ll live in longer than one of those periods of time, or you think you might be wanting to pull cash out in the future, you should consider an ARM loan. Often you could save a lot on your payments if you chose a 5 year Fixed, but you should be pretty sure you’ll be out of it within 5 years. If we have a credit market like the one today, you could be taking a risk that you don’t want to take.

    Right now most ARMS utilize the LIBOR index which is the London Inter Bank index and practically moves in lockstep with the Fed Funds rate, which some think might go up shortly. They take this index rate, which is in the 3%+ range today and ad a margin, lets say 2%, and that’s your rate 5%+, which is about a point lower than the 30 year rate. That’s can be a big difference from what a 30 year fixed payment would be. Make sure to look at the adjustments down the road, in case you are still in the loan when the adjustments start. Often it can change .5%+ every six months or it can change monthly. It’s a good time to at least compare a shorter fixed payment to a 30 year fixed cause you might be able to save a lot of money.

    Some Loan Officers know about how these loans are structured, many don’t. If you need help, email me.

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