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The best loan can either be the loan with the
lowest total costs, least long-term monthly payment, the least initial
monthly payment or the quickest equity build-up depending on your
situation.
A key input is your estimate of how long that you will own the
property. If you know you will not own a property long, you will want to
take advantage of the ARM's. If you have a career where you get
transferred a lot, you should factor that in your estimate of how long
you will own the property. In addition, it probably won't make sense for
you to pay points if you won't own the property very long. On the other
hand, if you plan on staying in a house for a while, a couple of factors
should be considered. For example, you should consider assuring yourself
an interest rate you are comfortable with and you should consider paying
points.
If your income will increase rapidly, you may want to consider an
ARM product to qualify for a larger home at a lower monthly payment,
realizing that your rate may adjust upward in the future. In this
instance, will your income increase a rate that will comfortably be able
to absorb the higher monthly payment if the ARM adjusts upward?
Lastly, your adversity to risk should be a factor. Risk takers would
be better suited for ARM loans versus a risk adverse borrower.
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