No. of Recommendations: 10
Hi Jeff (and all,)

OK... pretty much everyone knows what the fixed programs are... mostly. Let's look at the different ARMs, etc.

First, let's get the balloons out of the picture, as I don't really see any useful advantage to balloon proggies in the current environment. The lender's just aren't offering enough incentive to take a balloon loan and be forced to make a change when for the same price and rate you can be in a 30 year ARM with the flexibility to ridee it out if need be, or the weather permits.

Now... for Adjustible Rate Mortgages (ARMs) let's specify that we're talking about CONFORMING ARMs here... as there are many other flavors and species of arms available... each having different advantages for different lenders.

Among the conforming arms, we have several term structures;
1/1 ARM,
3/1 ARM,
5/1 ARM,
7/1 ARM,
10/1 ARM.

In each case, the initial rate is fixed for the number of years of the first figure. A 1/1 ARM is fixed for 12 months, a 5/1 ARM is fixed for the initial 60 months.

Then the rate maybe adjusted ONCE per YEAR (thus the second "1" figure.)

Most conforming ARMS have a max annual adjustment limit of 2 points, with a lifetime max limit of 6 points.

It's been estimated that over 70% of the homeowning population refinances on average every 3-5 years. It's also estimated that for homeowners 35 years old and younger, that number exceeds 95%.

I'm here to tell you that probably 80% of the young homeowners I speak with initially insist that THEY are the EXCEPTION (yeah... SU-U-U-U-U-R-E they are!!!)

If you want to play against the odds, or simply cannot sleep with any emotional uncertainty, then there's a fixed rate program with your name on it. It costs more, but hey... it's a fixed, sure thing, right?!!

If you're realistic, and can see that going with the odds can put a significant amount of change back in your pocket each year and leave you with more flexible options, then you might like the thought of custom fitting your financing with an ARM.

Please take this from where it comes from... I don't make a dime more either way a client finances. However, if the client gets well educated and is well advised in a way they know they can trust over time, I will get the return business for years down the road. I have many clients that are flabbergasted their previous financers never explained this all to them last time they got their 30 year fixed... and here they are refinancing 3 1/2 years later... just like the odds said they would.

Hope that helps... we could literally go on and on and on about ARMS and the zillion different parameters and trade-offs. Maybe another string.

Hope that helped. If so, let others know.

Dave Donhoff
Lic. Mortgage Broker
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