Fixed rate mortgages have been coming down in recent weeks, but more borrowers are starting to look to adjustable rate mortgages. ARMs posted the highest number of originations in December since Ellie Mae began tracking them in 2011, according to the National Association of Realtors.
With Adjustable Rate Mortgages, the interest rate is locked for a set period, such as five or seven years, and then will change based on market conditions. ARMs can provide consumers with some additional flexibility when purchasing a home because the rates and payments are lower early in the term of the loan. ARMs also allow borrowers to take advantage of falling interest rates without having to refinance. This can also be a more affordable way for borrowers to purchase a home who do not plan on living in the home for 20 to 30 years, which most people do not. The dream for homeownership is still alive and well and is still a possibility for borrowers in many types of situations.