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An adjustable-rate mortgage may be the best option at this time to lower your mortgage rate

DDA Mortgage • October 31, 2022

If you're looking for a mortgage, you have a lot of options. And one of the most popular choices, when interest rates are higher, is an adjustable-rate mortgage (ARM). But what exactly is an ARM? And why do so many people choose to get them as rates climb?



What you need to know about adjustable rate mortgages (ARMs)


Let's start with the basics: ARMs are mortgages that have interest rates that change over time.


Typically, an ARM will start off at a low rate and will increase or decrease as interest rates increase or decrease. Because adjustable-rate mortgages are adjusted, there is less risk to the lender, so they offer more favorable rates than your typical 30-year fixed mortgage.



Your Adjustable Mortgage Rate (ARMs) Options


In general, you want to get an adjustable-rate mortgage to take advantage of the lower initial rate. When rates drop, you want to refinance into a fixed mortgage with a lower rate. To avoid rate fluctuation in an ARM, we suggest applying for a 5 year or 7 year adjustable rate mortgage where you are locked into a known interest rate for 5 years or 7 years.



How Does A 5-year Adjustable Rate Mortgage Work?


A 5-year adjustable-rate mortgage (ARM) is a type of mortgage loan that's fixed for 5 years, then adjusts annually over the course of the remaining term.


The idea behind an ARM is that you'll be able to afford a higher home price than you might be able to with a fixed-rate mortgage because the monthly payment will be lower during the first five years of your loan. This allows you to buy a house without having to put more money down in order to qualify for a lower interest rate.



How Does A 7-year Adjustable Rate Mortgage Work?


Like the 5-year ARM, a 7-year adjustable rate mortgage is a type of mortgage loan that's fixed for 5 years, then adjusts annually over the course of the remaining term.


A 7-year ARM has an introductory period, or "honeymoon," where you pay a fixed interest rate for the first seven years of your loan. At the end of that time, your interest rate will be adjusted yearly based on market conditions and other factors.


If you're looking for a lower initial monthly payment, this is one of the best ways to get it. But if you want to lock in a specific rate for the life of your loan, you may want to look at other options.



Fixed Rate Mortgage vs. Adjustable Rate Mortgages


What's more important to you—getting the lowest monthly payment or avoiding any uncertainty?

In the short term, ARMs are the best for getting you the lowest monthly payment now. Fixed-rate mortgages guarantee that your principal and interest payments will not change. There are risks to both choices, but the most important thing to remember is you can refinance and go from an ARM to a fixed mortgage or from a fixed mortgage to an ARM.



When Shopping For A Mortgage Don't Lose Sight Of What's Important


There are so many great things about buying a home: You can make it your own, you can start building equity, and it's an investment in your future.


Rates are going to drop in the future, and when they do, you'll be glad you got a great deal on your home now! Adjustable rate mortgages are just another tool to get you there.


If you are shopping for a home, call us now (727) 784-5555. We will show you all your options, not just the traditional ones.


If you have questions about mortgages and home loans, please ask using the form below.

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Is it time to prequalify for a mortgage now

By Didier Malagies • January 20, 2025
1. Assess Your Financial Health Credit Score: Check your credit score (usually 620 or higher is required, though higher scores get better rates). Debt-to-Income Ratio (DTI): Calculate your monthly debt payments compared to your gross monthly income (lenders typically prefer a DTI below 43%). Savings: Ensure you have enough for a down payment (typically 3-20%) and closing costs. 2. Gather Financial Information Lenders will need the following: Proof of income (pay stubs, tax returns, W-2s/1099s). List of assets (savings, investments, retirement accounts). Details of current debts (credit card balances, student loans, etc.). 3. Choose a Lender Research different lenders, including banks, credit unions, and online lenders. Compare prequalification options (many allow online applications). 4. Complete the Prequalification Process Fill out the lender’s prequalification form (online, over the phone, or in person). Provide basic details about your income, debts, and assets. 5. Review Prequalification Results The lender will give you an estimate of the loan amount and potential interest rate. Remember, prequalification is not a guarantee of approval and doesn’t involve a hard credit inquiry. 6. Follow Up with Preapproval If you’re serious about buying, consider getting preapproved, which involves a more in-depth review and is stronger than prequalification. Tips: Use online calculators to estimate affordability before reaching out to lenders. Avoid large purchases or opening new lines of credit during the prequalification and preapproval process. Would you like details on specific lenders or tools to compare mortgage options? tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

USA Today: If Social Security falters, reverse mortgages could be worth a look

By Didier Malagies • January 13, 2025
Many retirees have said they rely largely — and sometimes entirely — on Social Security benefits as their primary income stream in retirement . But in instances where these payments may not be enough to make ends meet, other options should be considered — and in the right situation, a reverse mortgage could be one such option.  That’s according to a column published this week by USA Today , which assessed reverse mortgages in tandem with options such as personal savings, a part-time job and other benefits programs. “A reverse mortgage is a possibility for seniors with substantial equity in their homes,” the column stated. “It essentially enables you to borrow against your equity, and you aren’t required to make any payments while you’re still alive as long as you live in the house.” The column is likely referencing the Home Equity Conversion Mortgage ( HECM ) program insured by the Federal Housing Administration (FHA). Loan proceeds are dependent on the amount of equity in the home and current interest rates, the column noted, and there are multiple disbursement options available, the column noted. The minimum age requirement of 62, a core tenet of the HECM program, was also mentioned. “There are closing costs and other fees, and you’ll still be responsible for maintaining the property and paying the property taxes and homeowners insurance,” the column noted. It characterized the loan as a “solid option” for those who have few other assets beyond their homes, adding that “it might not be the right move if you intend to pass the property on to your heirs someday. After you pass away or move out of the home, you or your estate will have to repay the loan. This will reduce how much your heirs receive.” Recent survey data from Clever Real Estate highlighted some realities of relying on Social Security benefits in retirement. Roughly one in five respondents in the 1,000-person survey said they rely exclusively on Social Security benefits as their sole income stream in retirement, with nearly 30% saying they believed they would be able to rely on them. Last year, data from Nationwide suggested that an increasing number of older investors believe that retiring at the age of 65 is no longer a realistic option . This is largely tied to higher levels of stress they’re feeling about the economy and the cost of living.

Is it a good time to buy a home

By Didier Malagies • January 13, 2025
Deciding whether it’s a good time to buy a home amid higher interest rates depends on several factors. Here are some considerations to help you make an informed decision: 1. Your Financial Situation Affordability: Higher interest rates generally lead to higher monthly mortgage payments, which could impact your ability to afford a home. If you have a stable income and can comfortably manage these higher payments, it might still be a good time to buy. Down Payment & Savings: A larger down payment can reduce your loan size and help lower the impact of higher interest rates. If you have substantial savings, it could make sense to buy now, as you’ll likely have more equity and lower monthly payments. 2. Long-Term Investment Housing Market Trends: If you plan to stay in the home for several years, you might benefit from the property appreciation over time, even with higher interest rates. Historically, real estate tends to appreciate in value over the long term, although this can vary by location. Refinancing Opportunity: If interest rates eventually drop, you may be able to refinance your mortgage later at a lower rate, reducing your monthly payments. 3. Market Conditions Home Prices: In some areas, home prices have been high due to increased demand, so you may still face elevated prices despite higher interest rates. It’s worth considering whether you’re willing to pay the current asking price for homes in your area. Seller Motivation: In a high-rate environment, some sellers may be more willing to negotiate, especially if they’re facing longer time on the market. You might have more room to negotiate on price or terms. 4. Personal Goals If owning a home is important to your personal goals and lifestyle, it might make sense to move forward, even if rates are high. However, if your plans are more flexible and you can wait for a more favorable rate environment, it could be worth waiting. 5. Alternative Financing Options Adjustable-Rate Mortgages (ARMs): Some buyers opt for ARMs, which start with lower rates that can adjust after a certain period. This might be a way to secure a lower initial rate, but you should be comfortable with the possibility of future rate increases. Other Financing Programs: There are some government-backed programs (like FHA or VA loans) that may offer lower rates or down payment requirements, depending on your eligibility. Conclusion: It’s a mixed scenario. Higher interest rates generally make it more expensive to borrow, but if you’re financially prepared, plan to stay in the home long-term, and can find a property at a fair price, it could still be a good time to buy. On the other hand, if you’re concerned about affordability or want to wait for rates to decrease, it might make sense to hold off. Always consider speaking with a financial advisor or mortgage expert to get personalized advice based on your situation. tune in and lat earn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329 
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