Exploring the world of adjustable-rate mortgages as a new option.

If you've been keeping an eye on the news or scrolling through your social media feed, you might have come across discussions about an uptick in the number of adjustable-rate mortgages (ARMs) being obtained by buyers and borrowers. Today, we'll delve into what ARMs are, why their prevalence has increased, and address the concerns about their potential impact on the housing market.

An adjustable-rate mortgage, or ARM, is a type of mortgage where the interest rate can change periodically. It's a departure from fixed-rate mortgages, where the interest rate remains constant over the life of the loan. The recent surge in ARMs can be attributed to the significant increase in mortgage rates from the 3% range to around seven or seven and a half percent.

While some may raise concerns about history repeating itself and leading to another housing crisis, it's important to understand that today's ARMs are not the same as those that contributed to the Great Recession. Back then, a substantial portion of ARMs were low or no documentation loans, and a significant number were offered to borrowers with credit scores below 640.

“The current increase in adjustable-rate mortgages does not signal an impending housing crisis.”

Experts in the field are quick to differentiate the current scenario from the past. According to Akana Pradhan, an economist at CoreLogic, the landscape has shifted dramatically. Most conventional loans, including both ARMs and fixed-rate mortgages, now require full documentation and are extended to borrowers with credit scores above 640. This change ensures that the lending standards are much more robust than they were during the housing crisis.

In simpler terms, Laurie Goodman from the Urban Institute assures us that today's ARMs are no riskier than other mortgage products. Moreover, she highlights that their lower monthly payments might actually broaden access to homeownership for a larger pool of potential buyers.

The current increase in adjustable-rate mortgages does not signal an impending housing crisis akin to what was witnessed during the Great Recession. Lending practices have evolved, and stricter standards are in place to safeguard borrowers and the housing market as a whole. If you're considering purchasing a home, it's wise to explore the range of mortgage products available, including ARMs. Rest assured, today's market offers a more stable foundation.

For those looking to sell, it's an opportune time to connect with a real estate professional who can provide insights tailored to your situation. Give me a call or send me an email, and I would be happy to serve as your resource for all of your real estate needs.