The No Money Down Doctor Loan offers both fixed and adjustable rate mortgages. So which is the best choice for you?

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Recently there has been a lot of negative news surrounding adjustable rate mortgages, so why would anyone even consider these evil loans? In reality, an adjustable rate mortgage may be your best option. Let’s take a quick look at what an adjustable rate mortgage (ARM) really is, and its positives and negatives.
 
An ARM is a two-phased mortgage loan. During the initial phase of the loan term the interest rate and monthly payment are fixed. Usually at a lower rate than a traditional 30yr fixed. During the second phase, the interest rate becomes adjustable for the remaining term of the loan…thus causing the payment to adjust as well.
 
So what does this mean? Basically, my recommendation is that you only consider an ARM if you are certain that you will either refinance or sell your home before the initial fixed term expires. For instance, if you are considering a 5 year ARM, then you should be confident that you will either refinance or sell your home within the next 4-5 years.
 
Here are a few good reasons to consider an ARM: The initial fixed interest rate is usually much lower than a traditional 30yr fixed.If your rate is lower, then you will have a lower payment and pay less interest over the initial fixed term.If you are planning on upgrading your home before the ARM expires, you can take advantage of a lower rate during the time you live in your current home.If you anticipate refinancing for any reason before the initial term expires, then you can enjoy a lower interest rate in the meantime.The reason why a high-income earner might consider an ARM is because they are much more likely to refinance or purchase a new home every few years. Another reason is because high-income earners usually do not have problems qualifying for a refinance before the ARM adjusts. This leads me to the reasons why ARM’s are getting such a bad rap.
 
The primary reason why adjustable rate mortgages appear to be such a bad option is because too many borrowers opted for ARMS, who really shouldn’t have. This was due to bad advice from their loan officer, a lack of knowledge or maybe the temptation of a lower rate and payment.
 
When it comes time for these borrowers ARM’s to adjust, they may find themselves in a different financial position than they were three or five years ago, or the high credit risk programs that they used to purchase their home may no longer exist. Some of these borrowers are also struggling to make their house payment each month and likely do not have much cash reserves.
 
Couple this with decreasing home values, and they become stuck. They can’t sell their home because they owe more than it’s worth and they can’t qualify for a refinance to get out of their ARM. Then when their ARM goes into the adjustable phase, both their interest rate and their payment increase...sometimes by a lot. For someone who is already on a tight budget, this increase can sometimes break their bank. This is when we see foreclosures and further declining house values.
 
So is an ARM the right choice for you? It’s really not a good idea for me to make a generalized recommendation, since everyone’s individual circumstances are unique. There are many factors to take into consideration and questions that I would need answers to in order to make a qualified recommendation about which type of loan you should choose. If you’d like to discuss your options, feel free to contact me directly. I can ask you a just a few questions to determine which type of loan would be best for your unique situation, and I can also get you pre-qualified in about 15 minutes.
 
Enjoy your day!
 
Jeff Irving
Mortgage Loan OfficerPhone: 1.866.663.5461Check out my doctor loan blog: http://doctormortgageloan.blogspot.com/