There are lots of mortgage options for home buyers today and lots of factors that go into the type of loan and rate you will receive.
Borrowers applying for adjustable-rate mortgages are asking for much
larger loan amounts, raising concerns among housing analysts that ARMs
are being used thoughtlessly—just as they were during the pre-recession
housing bubble more than a decade ago.
The average size of an adjustable-rate mortgage
increased to $688,400
last week, more than double the
average fixed-rate mortgage—which is
$280,900—according to the Mortgage Bankers Association. Experts say
borrowers are attracted to ARMs for their lower introductory rates, but
once they reset to market value after five or seven years, homeowners
may no longer be able to afford them. That's why it is very important to speak with a Realtor and mortgage expert before making a decision.
Last week, the average rate for a five-year ARM was 3.96 percent
compared to 4.46 percent for a 30-year fixed-rate mortgage, according to
Freddie Mac.
The share of ARMs has been increasing,
particularly in expensive markets. Economists are quick to point out
that ARMs today are very different from the 2008 bubble-and-bust era.
MBA Chief Economist Mike Fratantoni told MarketWatch that ARMs typically
carry larger balances than fixed-rate mortgages because they help those
struggling to afford an expensive home. “I think there is still a
desire to use the product which is going to get you into the home, and
then there may be an opportunity to refinance into a fixed-rate mortgage
later,” Fratantoni says. Higher-income borrowers also may be more
tolerant of the financial risks of ARMs, he adds.
Recap:
- ARMs are more popular in expensive areas & on high-end homes.
- Lenders are much more strict about issuing ARMs
today than they were years ago
- Buyers need expert advice on the type of mortgage and size of home that will fit needs & budget
I, and my team of experts, are happy to answer all your questions. Give me a call today!
