ARMs!

ARMs!
Now, before anyone tunes out or starts holding up a cross or anything else to ward off demons….
Hear me out. Except for a few short-lived conversations with some more adventurous home buyers,
the talk surrounding Adjustable Rate Mortgages for conventional conforming loans, not Jumbo, have
been pretty quiet. The fixed rates have just been much better than the adjustable rates. So, the
conversations haven’t really gone too far.
Even as interest rates for 30 year fixed conventional loans top 8% I still don’t get much
call for ARMs, which I suspect is because of the absolute beating they took the last time this whole
thing melted down. Which, to be honest….. wasn’t all that fair. A mortgage is a tool…. It serves a purpose,
like any other tool, and an Adjustable Rate Mortgage serves a purpose just like any other loan program.
Use a tool correctly… good things can happen. Use it incorrectly and things have a tendency to go
sideways in a hurry. Which is exactly what happened….
Yes, I know there were other reasons and some very unreputable folks involved, but, I’m going to keep
it focused on some benefits here.
Adjustable Rate Mortgages are starting to slide back into favor with some investors and pricing is
improving. For example, the rate for the 30 year fixed loan is now for most borrowers is 8%, pay a couple
points and you could see a rate of 7.500%. To compare, that same loan with a couple of points could see
a rate of 7.000% for a 7/1 ARM. So, you have a 7.000% rate, fixed for 7 years, after which it goes into
the adjustable period for the remaining 23 years…. Or until the loan is refinanced.
As of August 19, 2023 we can now qualify at the note rate on the 7/1 ARM. That is a .5% better rate,
.5% better payment, .5% better qualifying. There are buyers that are just having a hard time qualifying
because of home prices and current interest rates, that .5% could be the key! Keys!