Lower adjustable mortgage rates (ARMs) can help buyers qualify for a bigger mortgage and a better house. ARMs can be fixed for up to ten years, so there is probably an ARM that minimizes borrower risk and saves money.

The real estate market is in an exciting time.  Americans are on the move as the economy starts to recover.

Real Estate agents and lenders are in a unique position to capitalize on this economic movement. Knowing which mortgage opportunity meets your client’s financial needs is more important than ever.

Fixed Rate Mortgages: Are They Always the Best?

Fixed rate mortgages are very attractive as they offer fixed terms for 15 or 30 years. They appear to be the safe alternative for those that like to know exactly what they will be paying each month over the course of the loan. While FRMs do offer stability, and tend to be the best option for those settled in their job and community, these loans are difficult to customize to individual buyer needs.

Fixed rate mortgages can actually be a bit riskier for those who might have difficulty qualifying for this higher priced loan or for those who might move prior to paying the loan off. Additionally, if rates drop during that 15 or 30 year period, the home buyer has to refinance to secure the lower rate. That can get expensive.

Source: How ARM Rates Help You Get More Home When Fixed Rates Keep Rising | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

Adjustable Rate Mortgages offer an alternative

The Adjustable Rate Mortgage, or ARM, is a home loan that adjusts periodically or is variable. Rates can rise but they can also fall. In the past, these loans got a bad rap because people experienced an almost immediate rise in their interest rate.

Today ARMs have built in fixed rates that protect the buyer for a determined amount of time before the rate can fluctuate.  These “hybrid” ARMS, identified as 3/1, 5/1, 7/1, or 10/1, depending on how long the rate is locked, have much lower interest rates than a fixed rate mortgage, which can save your buyer money!

Remember, the average home owner keeps their mortgage for less than 7 years, on average.

Let’s be in touch to discuss the best ways to educate our clients on which loan is best for them, as they purchase their new home.

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc.