First-Time Investor: House Hacking with a 5/1 ARM?

[Dillan Gomez]

Hey All!

I'm planning to purchase my first SFH and do a house hack at the end of this year to get into the REI game! A local lender has a first-time homebuyer program that offers 0% down with no PMI and $2k towards closing costs with a very competitive rate (6.025% as of 8/19/24). The only thing is that it's an ARM which I hadn't initially considered for my first property. The really attractive part of the loan is the idea of not having to put down cash as a downpayment (even though I do have cash available since I was initially anticipating going with a Conventional 30-year loan).

Is it fine to assume the risk of interest rates going up for the sake of putting 0% down? I'm thinking of cash-on-cash ROI here in the long term (I'm in a medium-appreciation environment which helps). The assumption is that I would re-fi to a conventional loan when (if) rates drop in the next 5 years. What things would you consider in my situation? I won't be cashflowing either way (whether I put 0 or 20% down) because of the market conditions, so that's not really what I'm going for (although it would be nice). This lender has NO PMI for any of their mortgage products so PMI for under 80% LTV isn't something I have to think about thankfully.

I'm conflicted because saving a lot of my cash that I had anticipated using for a downpayment could be great to use for my next property in a year (or later). If the interest rate environment is horrible in 5 years, I could also just sell the home if worse comes to worse since the anticipated appreciation will give me some decent equity by that point even though I would start at 0%.

Any advice would be very much appreciated. Has anyone done something similar in the past? Remember, this will be my first-ever home purchase. Thanks!