Fixed rates for rates below 6% are always a good idea. An adjustable rate mortgage at 3% that can change by 1% in 3 years (a 3/1 ARM) will increase your monthly payment by about 33%. That can be a real shocker. If the ARM can max out at 6% in increase (lifetime cap), then your payment will have tripled over the original. Not a good move. The risk of increasing market interest rates should tell you to stay away from ARMs unless the capped rate is below today's fixed rate.
Congrats on taking the first step to owning your first home! 4.75% is an VERY GOOD interest rate! When you're looking over your Good Faith Estimate please make sure to view what the APR is, as well. Please let me know if I can be of any assistance. I would be more than happy to assist you on purchasing your first home if you aren't already represented. Please feel free to contact me at anytime!
Make it a Blessed Day!
Tamika Turner Goree
Keller Williams Realty
Cell: (972) 697-1178
It is impossible to say without knowing your credit score and the fees associated with the rate that was provided. It might be a great deal but then again it might not be.
For those that answered that it was a great deal, what if she were being charged 3 points for the 4.75% rate? Still a great deal??
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William Raveis Legends Realty Group
Furthermore, since VA loan are also assumable (and only if you may one day wish to sale), 4.75% will be an even better rate as time and interest rates inevitable go by and climb.
As for wheterh or not you should get a fixed rate - it depends on how long you anticipate staying in the home. You say you're first-time homebuyers. If you plan on moving sometime in the next say 5 - 7 years, then no, you should not. You should opt instead for a hybrid Adjustable Rate Mortgage such as a 5/1 ARM or a 7/1 ARM. The rates for the initial fixed period (5 years on a 5/1 ARM, 7 years on a 7/1 ARM) will be lower than that of a 30 year fixed rate mortgage.
Still, if you've be preapproved for $180,000 but only are going to spend around $130,000, then you presumably can afford the fixed rate payment option. And if interest rates rise--as I expect them to--you may end up in a better situation with a fixed rate mortgage.
Hope that helps.
My recommendation is to go with a fixed rate but if you want to roll the dice or are pretty sure you might be moving on in about 5 years or so there are some attractive Adjustable Rate Mortgage's with interest rates in the 3s.