Are Adjustable Rate Mortgages a bad idea for me?

[tleemaximus]

I'm about to buy my first house and many people are telling me different things about mortgages. Lenders are pushing the 5 Year ARM or 10 Year ARM. However my dad from the old school is telling me that a 30 fixed is the best because rates are so low anyways.

My situation:

I'm 25, I make 70K a year roughly 4K per month and I will be taking out a mortgage around 300 thousand dollars. I'm buying in LA, but only planning to live here for about 5-7 more years. I'm thinking that 10 year ARM would be the best option. What are some of your thoughts about fixed vs. ARMs. What is best for me? 0 year fixed right now is about 5.74%5 ARM now is about 5.24% 10 ARM somewhere in between.

[MortgageGuy]

Interest rates are going up. You're absolutely right by picking the 10-yr ARM if you only plan to keep this house for less than 10 years but more than 7 years. I should remind you that there is also 7-yr ARM program available if this fits your situation. For some people have bad credit, it makes sense to get 5-yr ARM or even 3-yr ARM and then refiance when their credit improved.

[Persephone]

Mortgage guy is absolutely right. Even if you are planning to stay there for only 7 years maximum it won't hurt to check out all of your options. You might even want to think about interest only to bring down your payment. Recently in some cases I have found that the 30 year fix or even 40 year fix programs are at lower rates than the ARMs! I would definately do some research on different programs and their rates before you decide.