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ARMs – How to Avoid the Perils

CNN Money ran a great article this past week about the pitfalls of ARMs. It’s no secret that they were part of the recent real estate bust (a main contributor, if you will). But now they’re back in the mix as a viable option for many buyers. But how do you know whether to take an ARM or a fixed rate loan when you’re buying your next home?

We put some tips together to help you navigate the process. Of course, your lending professional can give you all of the details specific to your personal financial situation and home ownership plans, but these will get you thinking on the right track:

  • Time in the home: How long do you plan on owning the home? If work requires that you move every 3 years or so, a 3- or 5-year ARM might make more sense than a 15- or 30-year fixed rate loan.
  • Your first home: Are you planning on starting a family? First home out of college? Consider a longer-term fixed rate product so that your payments stay predictable and you’re not caught off guard by potential life changes.
  • What ARM is right for me? Think about what’s going on in your life and plans for the future. If you want to sock some money away in savings for the next few years, you might consider an ARM and take the money you would be spending on your mortgage and drop it into a savings account. We generally stay in our homes longer than we plan, so keep that in mind as well when choosing an ARM product.

We hope you’re enjoying the summer (now that it’s here) and if you need ideas to stay busy, check out our local events calendar. We keep our fingers on the pulse of the entire San Juan region and post it so you can have fun at your fingertips.

The Staff at San Juan Realty, Inc.

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