9 Reasons Houston First Time Home Buyers Should consider an adjustable rate mortgage (ARM)
Image by Diana for Firsthomehouston.com
Hi, thank you for visiting. According an article in the Wall Street Journal, Adjustable-Rate Mortgages Are Back! However, they are not what they used to be. With raising interest rates, and a bevy of new regulations now in place to protect buyers, well qualified home buyers are fueling demand for ARMs. Here are 9 reasons you may want to consider an Adjustable Rate Mortgage (ARM) now, if you’re in the market to buy a home.
These loans bear little resemblance to the ones blamed for fueling the 2008-09 financial crisis.
ARMs, carries a lower rate in the loan’s early years.
Mortgage-industry executives said there is little reason to fear a repeat of a 2008-2009 meltdown.
Today’s loans—and borrowers—are much safer than they were in the pre-crisis years, when lenders made loans with ultra-low teaser rates to subprime borrowers.
“The type of borrowers that are qualifying for ARMs today are significantly different from the borrower profile we saw qualifying back in 2006, 2007, 2008,” said Pat Sheehy, chief executive of Hamilton Home Loans
Today’s borrowers have an average credit score of about 750.
Borrowers who apply for ARMs today must be able to afford monthly payments significantly above the initial rate. The loan officer I spoke with at DHI mortgage, puts it this way. “If the initial rate is 3% with a potential reset of 7%, you must qualify based on the 7%”.
New ARMs borrowers can also take comfort in the fact that banks are most likely to keep ARMs on their books, instead of selling them to investors.
After the crash, regulations dramatically curtailed ARM offerings and enhanced borrower protections. Short-term teaser rates were banned, and annual increases were capped. In addition, lenders and service companies must inform borrowers in writing of coming rate changes. And lenders can no longer penalize borrowers who refinance an ARM or pay it off early.
Original article appeared in the print edition of the Wall Street Journal as Adjustable-Rate Mortgages Are Back, but Aren’t Like You Remember - Edited by Diana Walton
If it matters to you, it matters to us. We at First Home Houston is always looking out for your best interest. As always, we thank you for stopping by. Until next time… Diana.
Image: By Diana
