ARM vs. Fixed Mortgages

Q: I enjoyed your article regarding the question about how 5/1 adjustable rate mortgages compare with fixed-rate mortgages.
 

You made some very good points for reasons to get an ARM vs. a fixed.

But as a mortgage broker, I would like to point out that it is not "how long you plan to be in the house" that is a determining factor as you stated, but it is how long you plan to use the mortgage that is important. You did refer more to that in your examples though.

Also, I am not sure that telling people "don't forget to shop around for rates" is the right thing to do. For one, when most people shop for rates, they continuously will have their credit pulled which could affect their scores.

Also, this greatly effects how we do business. We now are competing against ourselves for the business. I think people need to check into a few company's before they move forward, but shopping around is not a good idea.

A: Thanks for your comments about the story, but we'll have to agree to disagree about the "shopping around" part.

To me, “shopping around” means calling a bunch of different kinds of lenders (mortgage brokers, bankers, a credit union, a national lender and perhaps an online lender) and going online to check out rates, programs, fees and other charges.

You shouldn't have to have your credit history pulled when you simply call to ask how much.

If you are being asked for your social security number every time you call -- and you're giving it -- then you might get into trouble. As you rightly point out, too many “inquiries” by prospective creditors against your credit history can lower your credit score.

But if you pull a copy of your own credit history and credit score and ask the lender to price the loan based on that number (with the understanding that eventually, if you decide to go with that lender another copy of your credit history will be pulled), then you shouldn’t have any extra inquiries to your credit history.

Managing your finances means staying in control of your information and making smart decisions. Shopping around for the best rate, terms and lender is one of the more important things you can do as a consumer -- and it's what keeps the mortgage market – and many other industries -- as competitive as it is.

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