re: ARMS – average person? Probably not. This was an economist talking . But over the last 30 years, rates have apparently dropped from 14% to even 6% or a bit more, right? So technically they would have worked out in the long run no matter what.

4%? I hadn’t heard that number as a goal. And I agree, rates are NOT going to get that low (and if they do – heck if they get to 4.75% – I’ll be looking into a re-fi myself!).

You also wrote: “Banks are scared of people with FICO scores of 800, since that just represents past credit stability. What if that person loses his job tomorrow because of the economy? Well, that would make that 800 pretty meaningless.”

Nope – gotta disagree here. FICO is a measure of more than stability. It measures available credit versus used credit and repayment history, among other (somewhat) mysterious criteria. So someone with a FICO of 800 (I’m not there, but darn close!) has a HISTORY of responsible payments, reasonable use of credit, and sound financial judgment that most likely transcends any one particular financial setback. These are the people to whom banks most WANT to lend because the relative risk is so low with that kind of proven track record.

And you wrote about ARMs: “The funny thing about people going with adjustable rate mortgages is that mortgage rates in the..80s? or so were around 14%. So if you took an ARM back then, and gambled that rates would go down at all, then you’d win out. It’s funny how that is.”

But ARMs readjust frequently, often every 5 years depending on the terms. So yes, mortgage rates might have been 14% in the 1980′s, but did they really drop drastically enough over that short time span for the average person to profit significantly from the adjustment? Not only that, but that person needs to know when to get OUT of the ARM into a fixed rate, or their short-term gains get quickly eaten by long-term losses.

I still think ARMs are like trying to make money by timing the stock market or winning in Vegas: you might get lucky, but you’re much more likely to lose your shirt (or house), even if you do know what you’re doing.