I haven't posted much because I'm still locking all mortgage rates, for Los Angeles home buyers, at application. The market is so volatile because some on Wall Street believe that we're NOT going to have a recession and that the Fed will reverse course and start raising the Discount and Fed Funds rates.
Say What? Well, I don't make the rules, I follow them. While I expect to see lower rates in 6 months, today, they're rising faster than a popstar's audience grows. Of course, what goes up can come crashing down (ask Britt) but today, we're dealing with higher mortgage rates.
The strategy I recommend is to obtain a 10/1 ARM at 5.375% (5.62% apr) with no discount points. You can lower the rate on that loan to 5.125% by paying a point upfront but it will take over 5 years to recoup that cost; I think you'll sell or refinance during that time (or have an opportunity to do so). I just can't understand why anyone would want a 30 year fixed AT EXACTLY 1% HIGHER than the 10/1 ARM.
Okay, let's get back to Britney Spears; she'll illustrate my point about the 10/1 ARM. In 1999, she was 17 years old and the hottest thing since Elvis. She released her debut album, Baby One More Time, and was the darling of kings and Presidents. Today, Britt's struggling in rehab and dealing with custody issues. In ten years, she will find God, get re-married, remake her career, and be considered one of the most influential artists of all time (only in America). Now, I'm exaggerating to reduce the ten year time frame to the ridiculous. I only wish the best for Britney and certainly wish the best for you.
That's why I'm so adamant about the ten year ARM.