What affects a home mortgage rate?

Question

I see it changing almost daily. What changes the rate that you can get for your home. What should i do as well?

I am getting a home and going through and have not decided on an 3-year ARM (adjustable rate mortgage), 5-year ARM or a fixed rate. Right now they are at 6.5%. with an ARM i am locked in with a rate of about .6% lower

Any suggestions? Lock-in for 30 years or do an adjustable?

Answer 1

Lock in on the fixed rate 30 year loan. An ARM often depends upon refinancing. In this market, there is no guarantee that will be possible. Housing prices continue to decline.

Be sure to get a loan that allows a payment on a 15-year basis as an option. You can pay the loan off early, if you like, but can revert to the 30-year payment if necessary with no penalty.

Answer 2

ARMs only work if you are in a market where values appreciate quickly. When the rate resets, you either need to have a boatload more cash than you do now to keep up with payments or have the ability to refinance or sell your home. To do either of the latter, you’re going to need a steep increase in your property value - and that's unrealistic.

Get a fixed under all circumstances. Interest rates are still really low and are only likely to go up from here.