If you’re wondering what that phrase after your name on a deed or title is, then this is the right blog for you! When title companies determine how you will hold title they will look at your “vesting” deed, which is your most recent deed. Determining how to hold title depends on an individual’s current situation, and how that person wants to pass ownership in the event of death, divorce or sale of their real estate.
Adjustable rate mortgages (ARMs) often get a bad rap. From rising interest rates to rate adjustments that could potentially take your payments outside of your budget, there are plenty of myths about ARMs. However, depending on your situation, an ARM might be just what you’re looking for.
So do you fit into one of the categories of people an ARM would benefit? Let’s take a look.
Are You a First-Time Home Buyer?
If so, you may want to consider an ARM. In many cases, the first home a person buys is considered a “starter home” – a generally small, economical house that meets the requirements of a young person or couple. After a few years, the person/couple outgrows the house, often desiring more space. Many times, this is due to a growing family. If you plan on having children within five years of owning your home, you may want to upgrade to a bigger home once the baby arrives. If children aren’t part of the equation, you might take into consideration other factors such as your job. Are you thinking of changing cities or relocating for work in the next five years?
If you fit into any of the above scenarios, a 5-year ARM may be right for you. Why? Because your interest rate and payment will be low for the first five years before potentially increasing. Since your rate is locked in for the initial five years, there are no surprises. With lower payments during the first five years, you’ll be able to save money for a bigger home that you’ll likely buy in the not-so-distant future.
Do You Need to Improve Your Credit?
Have you ever been late or missed paying rent or any other bills? If so, there’s a good chance your credit is in need of some repair. If you’re unsure of your current credit score, our sister company Quizzle can help. With Quizzle, you can check your credit score and also get a free credit report. In order for you to get the home of your dreams eventually, you may have to purchase a more affordable home where you can easily make your payments and rebuild your credit. If that’s the case, an ARM is right for you. As long as you’re able to pay your bills on time, you can save money while also reestablishing your credit. It’s a win-win for you.
Is Your Debt-to-Income Ratio High?
Do you have student loans you’re paying off? If so, there’s a good chance your debt-to-income ratio is too high for you to prove you can afford the home you want in the long run. In this case, an ARM may be to your advantage. By taking advantage of the lower interest and low monthly payments during the initial period, you can save money and put it toward other bills, such as your student loans. The sooner you pay off the loans, the better off you’ll be in the long run.
If you’re looking to purchase your first house, an ARM may be your best bet for now. What’s wrong with having low monthly payments while you save up for a new house or improve your credit?
At Quicken Loans, we offer both conventional and FHA ARMs. The benefit of going with an FHA mortgage if you meet the requirements is that you only need to have 3.5% for a down payment, allowing you to keep your cash in addition to lowering your monthly payment with the ARM.
Has anyone taken advantage of an ARM who was a first-time home buyer, needed to improve their credit or had a high debt-to-income ratio? Tell us about your experience in the comments below!