“We’re looking at buying a home and our mortgage broker suggested an adjustable loan. But with all that’s happened, I’m hesitant. Aren’t adjustable loans too risky?”
Answer:
Right after I got this question, the San Diego Union-Tribune ran an excellent article by Lew Sichelman on the exact same topic. Here are some excerpts:
“Adjustable-rate mortgages are getting a bad rap. ARMs have been lumped in with such ‘toxic’ mortgage products as interest-only loans, pay-option ARMs and loans with negative amortization. Those loans, along with 2/28 and 3/27 ARMs, are part of the reason for the mortgage-market meltdown.
But we’re not talking about those loans. We’re talking about more conventional products known as hybrid ARMs. These are loans that carry fixed rates for the first five or seven years, after which the rate is adjusted up or down annually based on market conditions at the time.”
One wildcard you’re facing is that you can’t get a decent fixed-rate on a jumbo loan (over $697,500).
So my advice is, for loans up to $697,500, you probably should get a fixed rate. Over $697,500, get the hybrid adjustable.
If you need the name of a good mortgage lender, I know a great one. Just call me 858-457-KENT and I’ll give you his contact info.
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