{"id":9045,"date":"2023-08-22T18:06:24","date_gmt":"2023-08-22T22:06:24","guid":{"rendered":"https:\/\/blog.sfloridaluxuryhomes.com\/?p=9045"},"modified":"2023-08-22T18:06:24","modified_gmt":"2023-08-22T22:06:24","slug":"why-you-dont-need-to-fear-the-return-of-adjustable-rate-mortgages","status":"publish","type":"post","link":"https:\/\/blog.sfloridaluxuryhomes.com\/?p=9045","title":{"rendered":"Why You Don\u2019t Need To Fear the Return of Adjustable-Rate Mortgages"},"content":{"rendered":"
\"Why<\/p>\n

If you remember the housing crash back in 2008, you may recall just how popular adjustable-rate mortgages (ARMs) were back then. And after years of being virtually nonexistent, more people are once again using ARMs when buying a home. Let\u2019s break down why that\u2019s happening and why this isn\u2019t cause for concern.<\/span><\/p>\n

Why ARMs Have Gained Popularity More Recently<\/strong><\/h4>\n

This graph uses <\/span>data<\/a> from the <\/span>Mortgage Bankers Association<\/em> (MBA) to show how the percentage of adjustable-rate mortgages has increased over the past few years:<\/span><\/p>\n

<\/a><\/p>\n

As the graph conveys, after hovering around 3% of all mortgages in 2021, many more homeowners turned to adjustable-rate mortgages again last year. There\u2019s a simple explanation for that increase. Last year is when mortgage rates climbed dramatically. With higher borrowing costs, some homeowners decided to take out this type of loan because traditional borrowing costs were high, and an ARM gave them a lower rate.\u00a0<\/span><\/p>\n

Why Today\u2019s ARMs Aren\u2019t Like the Ones in 2008<\/strong><\/h4>\n

To put things into perspective, let\u2019s remember these aren\u2019t like the ARMs that became popular leading up to 2008. Part of what caused the housing crash was loose lending standards. Back then, when a buyer got an ARM, banks and lenders didn\u2019t require proof of their employment, assets, income, etc. Basically, people were getting loans that they shouldn\u2019t have been awarded. This set many homeowners up for trouble because they couldn\u2019t pay back the loans that they never had to qualify for in the first place. <\/span><\/p>\n

This time around, lending standards are different. Banks and lenders learned from the crash, and now they verify income, assets, employment, and more. This means today\u2019s buyers actually have to qualify for their loans and show they\u2019ll be able to repay them. <\/span><\/p>\n

Archana Pradhan, Economist at <\/span>CoreLogic<\/em>, <\/span>explains<\/a> the difference between then and now:<\/span><\/p>\n

\u201cAround 60% of Adjustable-Rate Mortgages (ARM) that were originated in 2007 were low- or no-documentation loans . . . Similarly, in 2005, 29% of ARM borrowers had credit scores below 640 . . . Currently, almost all conventional loans, including both ARMs and Fixed-Rate Mortgages, require full documentation, are amortized, and are made to borrowers with credit scores above 640.\u201d<\/em><\/p><\/blockquote>\n

In simple terms, Laurie Goodman at <\/span>Urban Institute<\/em> helps drive this point home by <\/span>saying<\/a>:<\/span><\/p>\n

\u201cToday\u2019s Adjustable-Rate Mortgages are <\/em>no riskier than other mortgage products<\/em><\/strong> and their lower monthly payments could increase access to homeownership for more potential buyers.\u201d<\/em><\/p><\/blockquote>\n

Bottom Line<\/h3>\n

If you\u2019re worried today\u2019s adjustable-rate mortgages are like the ones from the housing crash, rest assured, things are different this time. <\/span><\/p>\n

\u00a0<\/span><\/p>\n

And, if you\u2019re a first-time homebuyer and you\u2019d like to learn more about lending options that could help you overcome today\u2019s affordability challenges, reach out to a trusted lender.<\/span><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

\"Why<\/p>\n

If you remember the housing crash back in 2008, you may recall just how popular adjustable-rate mortgages (ARMs) were back then.<\/span><\/p>\n<\/div>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"bgseo_title":"","bgseo_description":"","bgseo_robots_index":"","bgseo_robots_follow":"","footnotes":""},"categories":[3,134,84,118],"tags":[],"class_list":["post-9045","post","type-post","status-publish","format-standard","hentry","category-blog","category-buying-myths","category-for-buyers","category-interest-rates"],"_links":{"self":[{"href":"https:\/\/blog.sfloridaluxuryhomes.com\/index.php?rest_route=\/wp\/v2\/posts\/9045","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.sfloridaluxuryhomes.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.sfloridaluxuryhomes.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.sfloridaluxuryhomes.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.sfloridaluxuryhomes.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9045"}],"version-history":[{"count":0,"href":"https:\/\/blog.sfloridaluxuryhomes.com\/index.php?rest_route=\/wp\/v2\/posts\/9045\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.sfloridaluxuryhomes.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9045"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.sfloridaluxuryhomes.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9045"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.sfloridaluxuryhomes.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9045"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}