Q: I expect to see myself only staying in my first home here in St.Louis between 3-7 years depending on whether or not I continue with law school and then move out of the city.  With rates so low, should I go with a 3, 5, or 7 year ARM or just get a 30 year fixed rate loan to avoid the risk of rates going back up?

A: The answer to your question would depend on how likely you are to stay in your home past 5 or 7 years.  Rates on hybrid arms are substantially lower than 30 year rates.  Depending on the term of the arm that you choose your discount will vary from .75% to 1.5% lower than the 30 year.  Depending on your loan size, ARMs will result in a substantial savings during the initial 3 to 7 year period. ARM loans also have adjustment caps designed to alleviate "payment shock"  if interest rates move substantially higher.  Typical adjustment caps are 2/6 which mean the rate will adjust no more than 2% per year and no more than 6% over the life of the loan.  It does not make a lot of sense to pay a premium to guarantee a rate for 30 years if you only intend to use the loan for 3-7 years.  My recommendation would be to seriously consider one of the above mentioned ARMs.  For more information on ARMs and other loan programs visit the mortgage center at www.midwestmortgagecapital.com.  Good luck Jerry