FHA 5 Year ARMS

I know that ARMS (adjustable rate mortgages) have gotten a bad reputation these past few years, ARMS are often cited in press about the foreclosure situation and unethical predatory lending. That said, some ARMS make a lot of sense for certain buyers. The Prosperity Mortgage's new FHA 5 year ARM rates are 3.75% for the first five years and can go up a max of 1% per year, capping out at 8.75% in the 10th year. So if a homeowner thinks they might be in a property for 5-7 years, their average interest rate over those 7 years is still less than it would be with a 30 year fixed mortgage and they get the benefit of having lower payments in the first few years of ownership. With an ARM (and with any loan) you have to read the fine print to know what you are getting into down the road should plans change and you wind up in the property for longer than 5 years.