Did you know that a first time home buyer on average will live in their first home between 4 to 6 years? There are a lot of reasons for this but I won’t waste your time on here for that.
After working with numerous Financial Planners and Advisers there are numerous programs that we have come with up to determine the best financial investment for the new home owners.The program that makes the most sense is an FHA 30 Year Fixed 7/1 ARM Program. I realize that it is extremely unconventional to promote an ARM but what most people do not realize is that FHA has much more control how these programs work. One of the biggest advantages for this program, there is only a 2% lifetime cap with a 1% annual cap after the initial rate.
Here is how it works:
- Fred and Susie closed on their loan January of 2012 with a initial rate of 3% with a lifetime cap rate of 5% on a loan ammount of $200,000
- The monthly P&I payment is $843.21
- The qualifying P&I is $1,073.64
- The underwriter qualified this person based upon the 5% rate to make sure that Fred could afford to make the higher mortgage payments.
- His monthly savings is $230.43
- In 2019 the rate adjust to 4%
- This is where the 1% yearly cap kicks in
- In 2020 the rate adjust to 5%
- This is where the 2% lifetime cap kicks in
- This is the highest the rate will ever change
However in 2018, Fred and his wife found out that their family is growing and need to buy a bigger home. Since they were discpilined and saved their $243.43 (The difference from 3% and 5%) every month for 6 years, they were able to put an additional $16,590 towards the downpayment of their new home.
To learn more, call me at 512-773-6729