This is what the mortgage lady told me... what do you all think?

Hi, we're shopping for mortgages right now. I've always been told to steer clear of ARMs like the plague. You could get one today at 3% and tomorrow they could raise it to 50% just because. But yesterday we were talking to a loan specialist and she said it would work good in our case. She had what were ARM mortgages but they were fixed for a period of time (3 or 5 years.) Then after the 3 or 5 years, they can adjust to anything. Then she said after the 3 or 5 years or when the interest rate goes up, we could just refinance, which the refinance fees would be around $2,000. But I believe we'd save over $2,000 if we had an arm at 3.5% for 5 years (fixed for 5 years), rather than getting a fixed at 6%. The house we want to buy is only going to be $88,000. (We're already renting the house... We've paid off quite a bit of it... the house appraises for $130,000.)So, is there something I'm missing? I have a feeling I'll get into this and then 2 months, something will go sky rocketting high and I'll be tied into it for 5 years. I know nothing about mortgages. Is there anything that they can do to not allow me to refinance when the rate goes up? The loan officer says no, but I also wonder if she has her own interests in mind too when she answers our questions... so I need answers from people that have absolutely no benefiting from what we do.Also, how much on the average is a mortgage payment? On this house mortgaging it at $88,000 with an ARM starting at 3.5%, with taxes and insurance, the monthly payment is going to be $930!!!Part of the problem that I'm told though is that the home is non-homesteaded because we rent it right now. Even though we've paid off $15,000 of the house (and installed central air out of our own money which was $5,000), we'd still be better off buying another house. (We moved into this house with the intentions of buying it from the start.) What she said is the house has to be homesteaded and that will save us $200 a month in taxes, but that can only be done once a year.I guess this year if we buy the house before the end of the year, we get $8,000 tax credit. So what she said to do was start closing on the house in November. Close on it in December so we get the $8,000 credit. Our first payment wouldn't be due until February of $930. We can only homestead the house in May. (I can't believe that can only be done once a year, but that is what she says.) So from February to May we'd have to pay the $930 a month (but we got the $8,000). Then in May we homestead the house and the payment would go down to $730 (which seems awfully high for a now around $82,000 mortgage...). But I guess we live in a high tax area so that accounts a lot for it.So, then we're thinking about taking a loss and moving to a lower tax area because to stay here, we have to pay $3200 a year in taxes??? And this is to live in the middle of the city... To live in the country, I guess now I'm told it is a fraction of that and both my wife and I hate living in the city anyways but were doing it because we thought it was going to save us money...So, this is everything we've found out in the last day. I guess looking back, it looks like I'm rambling on... but I just want to get everything out there that the mortgage lady said. Does this all make sense? I can't afford a mortgage of $930... especially for an $88000 mortgage. I could understand paying $930 a month on a $200,000 house... I was expecting more like $550 or $600 when I went there. Is there something she's leaving out that would save us a lot a month on a mortgage? How much does the average person pay a month for a mortgage, insurance and taxes on a $100,000 house? I know it varies on the area you live in... but I guess I'm looking at round abouts (and maybe somewhere cheaper to live.)I mean, I don't believe I make bad money, but I'm very far from rich. We are lower than average income. But I definitely don't make minimum wage (maybe about 3 times that... give you a ball park.) You can't buy a house for much less than $80,000... and I can't imagine people that are broke making minimum wage buying the cheapest house they can find which is the $80,000 mark and paying $930 a month (which is probably more than what they get paid for the whole month anyways.) by hanklinhillardhan... from Azle, Texas. Oct 13th 2009 Reply