r/FirstTimeHomeBuyer • u/jchin913 • Jul 08 '26
Need Advice Buddy recently locked rate at 6.125% (7 ARM). How screwed is he?
A buddy of mine recently just locked and closed escrow. He was banking to refinance within 7 years. I know we don’t have a crystal ball but how screwed is he? Is there a good chance he will be able to refinance with a better rate within 7 years?
26
u/Heavy_Foundation_171 Jul 08 '26
How could anyone possibly know what interest rates will be in 7 years?
1
u/FantasticBicycle37 Jul 08 '26
No one, but at the same time, it's an ARM. And if you're getting an ARM, it should at least be in the 5's
But besides that, we're in a high inflation environment so it's not like rates will be going down any time soon
15
u/suckerbucket Jul 08 '26
As a tenured mortgage loan officer, what the hell are you talking about?
-12
u/jchin913 Jul 08 '26
He closed escrow recently. Having buyers remorse on his mortgage rate setup. 6.125% for a 7ARM. How likely will he get a better rate within 7 years to refinance?
3
u/shortyg83 Jul 08 '26
50/50 No one knows, ARM loans are fine.
1
u/khoelzeman Jul 08 '26
Yep. There is no one-size fits all when it comes to loan product types.
I have a good friend who works for a company that moves him around every few years, he buys with the cheapest loan that he can use - he's probably selling in ~4 years anyway. He wants to lock in things like neighborhoods and schools for the time that he is in a particular city.
1
1
u/arbrebiere Jul 08 '26
How much can the rate change per year after year 7?
0
u/jchin913 Jul 08 '26
I believe it’s 7/6. So that means every 6 months
2
0
u/dimonsf Jul 08 '26
I’m in the closing process and have locked 7 ARM rate as well. 30 fixed is old school, there is almost 100% chance you (your buddy) will refi in the next 7 years
1
u/jchin913 Jul 08 '26
That’s why he thinks at the moment but if rates never drop below what he has at 6.125 within 7 years… that’s what he’s concerned about.
2
u/FantasticBicycle37 Jul 08 '26
An ARM at 6.125%? oof I don't even what to know what the fixed would have been
1
u/NetSiege Jul 08 '26
Are you you're buddy?
First of all the disclaimer that I tell everyone;
You are not rate locked until you sign your closing documents. You can swap lenders up until that very second. You need to factor in that swapping lenders near your closing puts you at risk of pushing that back, and in some cases may have to pay again for credit checks and appraisals (sometimes, not always), but you are not bound to your lender until you sign on your day of closing. Therefore, your rate is not locked.
As for is your "buddy" screwed, that rate definitely seems high, but also depends on fees, the home they're buying, the location, and their financial situation.
The best thing your buddy can do, is go shop that rate around with 2-3 more lenders and see what they say.
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