{"id":8122,"date":"2023-08-22T10:30:00","date_gmt":"2023-08-22T10:30:00","guid":{"rendered":"https:\/\/thezakariagroup.com\/why-you-dont-need-to-fear-the-return-of-adjustable-rate-mortgages\/"},"modified":"2023-08-22T10:30:00","modified_gmt":"2023-08-22T10:30:00","slug":"why-you-dont-need-to-fear-the-return-of-adjustable-rate-mortgages","status":"publish","type":"post","link":"https:\/\/thezakariagroup.com\/why-you-dont-need-to-fear-the-return-of-adjustable-rate-mortgages\/","title":{"rendered":"Why You Don\u2019t Need To Fear the Return of Adjustable-Rate Mortgages"},"content":{"rendered":"<div><img decoding=\"async\" width=\"358\" src=\"https:\/\/files.keepingcurrentmatters.com\/content\/images\/20230821\/20230822-Why-You-Don-t-Need-To-Fear-the-Return-of-Adjustable-Rate-Mortgages.jpg\" alt=\"Why You Don\u2019t Need To Fear the Return of Adjustable-Rate Mortgages Simplifying The Market\" loading=\"lazy\" style=\"display: block; margin-bottom: 5px; clear: both; max-width: 100%;\"><\/p>\n<p><span style=\"color: rgb(33, 33, 33);\">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<h4><strong style=\"color: rgb(33, 33, 33);\">Why ARMs Have Gained Popularity More Recently<\/strong><\/h4>\n<p><span style=\"color: rgb(33, 33, 33);\">This graph uses <\/span><a href=\"http:\/\/www.mba.org\/\" rel=\"noopener noreferrer\" target=\"_blank\">data<\/a><span style=\"color: rgb(33, 33, 33);\"> from the <\/span><em style=\"color: rgb(33, 33, 33);\">Mortgage Bankers Association<\/em><span style=\"color: rgb(33, 33, 33);\"> (MBA) to show how the percentage of adjustable-rate mortgages has increased over the past few years:<\/span><\/p>\n<p><a href=\"https:\/\/www.simplifyingthemarket.com\/content\/images\/20230821\/20230822-Percent-of-arms-increased-since-2021.png\" rel=\"noopener noreferrer\" target=\"_blank\"><img decoding=\"async\" src=\"https:\/\/files.keepingcurrentmatters.com\/content\/images\/20230821\/20230822-Percent-of-arms-increased-since-2021.png\"><\/a><\/p>\n<p><span style=\"color: rgb(33, 33, 33);\">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<h4><strong style=\"color: rgb(33, 33, 33);\">Why Today\u2019s ARMs Aren\u2019t Like the Ones in 2008<\/strong><\/h4>\n<p><span style=\"color: rgb(33, 33, 33);\">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<p><span style=\"color: rgb(33, 33, 33);\">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<p><span style=\"color: rgb(33, 33, 33);\">Archana Pradhan, Economist at <\/span><em style=\"color: rgb(33, 33, 33);\">CoreLogic<\/em><span style=\"color: rgb(33, 33, 33);\">, <\/span><a href=\"https:\/\/www.corelogic.com\/intelligence\/rising-rates-lead-to-increase-in-adjustable-rate-mortgage-arm-activity\/\" rel=\"noopener noreferrer\" target=\"_blank\">explains<\/a><span style=\"color: rgb(33, 33, 33);\"> the difference between then and now:<\/span><\/p>\n<blockquote><p><em style=\"color: rgb(33, 33, 33);\">\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<p><span style=\"color: rgb(33, 33, 33);\">In simple terms, Laurie Goodman at <\/span><em style=\"color: rgb(33, 33, 33);\">Urban Institute<\/em><span style=\"color: rgb(33, 33, 33);\"> helps drive this point home by <\/span><a href=\"https:\/\/www.urban.org\/urban-wire\/should-borrowers-be-afraid-adjustable-rate-mortgages\" rel=\"noopener noreferrer\" target=\"_blank\">saying<\/a><span style=\"color: rgb(33, 33, 33);\">:<\/span><\/p>\n<blockquote><p><em style=\"color: rgb(33, 33, 33);\">\u201cToday\u2019s Adjustable-Rate Mortgages are <\/em><strong style=\"color: rgb(33, 33, 33);\"><em>no riskier than other mortgage products<\/em><\/strong><em style=\"color: rgb(33, 33, 33);\"> and their lower monthly payments could increase access to homeownership for more potential buyers.\u201d<\/em><\/p><\/blockquote>\n<h3>Bottom Line<\/h3>\n<p><span style=\"color: rgb(33, 33, 33);\">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<p><span style=\"color: rgb(33, 33, 33);\">\u00a0<\/span><\/p>\n<p><span style=\"color: rgb(33, 33, 33);\">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<p class=\"wpematico_credit\"><small>Powered by <a href=\"http:\/\/www.wpematico.com\" target=\"_blank\" rel=\"noopener\">WPeMatico<\/a><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"<p>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. Why ARMs Have [&hellip;]<\/p>\n","protected":false},"author":101010,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[110,99,104],"tags":[],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why You Don\u2019t Need To Fear the Return of Adjustable-Rate Mortgages - The Zakaria Group<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/thezakariagroup.com\/why-you-dont-need-to-fear-the-return-of-adjustable-rate-mortgages\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why You Don\u2019t Need To Fear the Return of Adjustable-Rate Mortgages - The Zakaria Group\" \/>\n<meta property=\"og:description\" content=\"If you remember the housing crash back in 2008, you may recall just how popular adjustable-rate mortgages (ARMs) were back then. 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