Home Buyers Leaning Toward ARMs As Mortgage Rates Climb
The Census Bureau posts a jump in single-family housing starts; today’s mortgage rates and the 5-day interest rate trend; and, Ellie Mae data shows home buyers using ARMs with greater frequently as mortgage rates climb.
For Buyers, More Homes About To Come Online
Home builders are doing their part to make more homes for sale.
According to joint data from the U.S. Census Bureau and the U.S. Department of Housing & Urban Development, the number of single-family homes on which builders broke ground climbed to 936,000 last month.
The figure marks an 18 percent jump in single-family housing starts from a year ago, and is the second-highest reading in the last ten years.
For buyers of new homes, the news forecasts higher home supply into the last two quarters of the year nationwide, which may relieve the recent, upward pressure on prices.
Home buyer demand outweighs the supply of homes in many U.S. markets. More than half of all homes sell in fewer than 30 days and the median days on market for an existing home is just twenty-six days.
It’s no surprise, then, that listing prices are up.
Home values climbed close to seven percent for the third consecutive year this year and, in some cities, list prices are 15 percent higher as compared to twelve months ago.
The pop in housing starts tempers the imbalance in supply-and-demand and helps to improve home affordability.
It’s different to buy a newly-built home from a builder than to buy an existing home from a consumer. Have real estate agent representation of your own and get help negotiating your best possible deal.
There are more new homes to choose from so shop accordingly.
Today’s Mortgage Rates & Interest Rate Trends
Mortgage rates are down today.
For home buyers and homeowners consider the refinance of an FHA mortgage or a conventional one, markets are favorable to start the week.
Current mortgage rates are lower across all loan types:
- Conforming mortgages: Lower
- FHA mortgages: Lower
- VA mortgages: Lower
- USDA mortgages: Lower
- Jumbo mortgages: Lower
Mortgage rates are individualized and vary on about a dozen factors including your loan size, the amount your borrowing, and your credit score. The state in which you live make a difference, too — some states get access to lower rates than others.
Getting a mortgage rate quote is simple, but talk with two or more lenders always.
Lenders use different pricing models and those models change daily. Today’s best mortgage rates might come from a different lender than yesterday. And, you won’t know until you comparison shop.
Click here to get a live mortgage rate quote to help you shop better.
Get Today’s Mortgage Rates
ARMs More Popular As A Mortgage Choice
Mortgage applicants are flocking to adjustable-rate mortgages (ARMs).
New data from mortgage software firm Ellie Mae shows that 6.6 percent of mortgage applicants used an adjustable-rate mortgage in May, a one percentage-point increase from the start of the year and the largest market share for ARMs among homeowners since 2014.
It’s common for ARM usage to increase when mortgage rates rise — especially among homeowners who plan to move within the next 10 years. ARMs grants access to lower mortgage rates for a fixed period of time, which lowers the cost of homeownership.
ARMs work like this:
- There’s a starter rate that used for some number of years, up to 10
- After the starter rate end, a new rate is calculated based on a formula
- Every one year, another new rate is calculated based on the same formula
The rules for adjustable-rate mortgages are straight-forward and designed to protect all parties to the transaction. Interest rate changes are often limited to ±2 percentage points per year; and, ±6 percentage points total over an ARM’s 30 year lifespan.
Nobody wins when loan payments become unsustainable. And, when homeowners use ARMs effectively, adjustable loans can be terrific tools for cash management and home budgeting.
A 7-year ARM may be more suitable to a first-time home buyer who plans to move in the next decade for a new job or a bigger home as compared to 30-year fixed-rate mortgage that comes at a premium.
Today, ARM interest rates beat fixed-rate loans by 75 basis points (0.75%).
Adjustable-rate mortgages aren’t products to boost your home affordability. They’re tools to help you do more with what you have. And, today, homeowners are using them more often.
Ask your mortgage loan officer about adjustable-rate loans and how they can fit your budget.