Why Home Buyers Should Consider Adjustable-Rate Mortgages

With interest rates on the rise, it may be time for home buyers to take a fresh look at some alternatives to the 30-year, fixed-rate mortgage, which has dominated the mortgage market since the financial crisis.

While many out-of-the-mainstream loans got a black eye in the subprime debacle, today’s versions have been shorn of the toxic features—such as negative amortization and prepayment penalties—that tripped up many borrowers during the housing bubble a decade ago.

Plan to move

Experts say today’s adjustable-rate mortgages, or ARMs, as well as interest-only loans, are especially suitable for borrowers who expect to move before any rate increases can wipe out the savings in the early years. They’re also useful for sophisticated borrowers wrestling with uneven income, borrowers who expect their income to rise, or borrowers who are willing to bet they can invest their mortgage savings for a greater return elsewhere.

A sweet spot

Many borrowers can find a sweet spot, for example, in the so-called 7/1 adjustable-rate mortgage, which carries a fixed rate for seven years before starting annual adjustments. With a typical rate of 3.75%, the monthly payment on a $300,000 loan would be $1,389, compared with $1,449 for a 30-year, fixed-rate loan at 4.1%, saving the borrower $5,040 over seven years.

A disciplined borrower

So who would take such chances?

Experts say most people would be wise to stay away, but an interest-only deal would suit a “disciplined” borrower likely to move during the interest-only period, as well as borrowers who have uneven incomes, are confident they can invest the savings more profitably or expect a rising income to make big future payments bearable, says Ray Rodriguez, TD Bank’s regional mortgage-sales manager for the metropolitan New York area.

New underwriting rules

Today’s interest-only borrowers qualify within underwriting rules which usually require lower debt-to-income ratios, higher credit scores and larger down payments than in the past. The goal is to ensure the borrower can pay even after rates rise and the principal payments kick in.

Today’s interest-only borrowers usually ‘require lower debt-to-income ratios, higher credit scores and larger down payments” than in the past, says David Doyle of Bank of America.

Superior Mortgage Lending aggressive ARM pricing can provide a lower payment for your client! Secure your borrower in a competitive 5/1, 7/1 or 10/1 low interest rate ARM.

  • Provide savings for your clients with lower rate and payment options
  • Quickly and easily price out your loans with Easy Qualifier (EQ) to determine your borrower’s best scenario
  • Reduced caps to 2/2/5 on all 5/1 ARM products
  • 7/1 ARMs qualify at the actual note rate

Elite High Balance ARM

Need an ARM loan to accommodate non-conforming loan amounts for your top-tier borrowers? The Elite High Balance 5/1 and 7/1 ARM products are great options.

  • 740+ FICO
  • Up to 90% LTV
  • Loan Amounts from $424,101 up to County Loan Limits
  • Appraisal Waivers honored
  • Underwrite to AUS findings

 

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About Superior Mortgage Lending LLC

Superior Mortgage Lending LLC is a full service mortgage broker located in Las Vegas, Nevada. Our goal is to provide excellent service to you throughout the process. NMLS # 372130 Nevada License # 3582 California License # 603K964 Arizona License # 0119906 8867 W Flamingo Road STE 200 Las Vegas, NV 89147 (702)507-4170 / www.superiorml.com
This entry was posted in 15 Year Mortgage Rates, 30 Year Mortgage Rates, Best Mortgage Brokers in Las Vegas, Commercial Real Estate Lending, Commerical Loans, Conventional Loans, Current Rates, FHA Mortgage, FHA Purchase, FHA Streamline Refinance, first time home buyers, Government Loans, Hiring Loan Originators, Home Buyers Las Vegas, home loans california, home loans las vegas, Home Mortgage, Home Refinance, Jumbo Loans, Las Vegas Home Mortgages, Las Vegas Mortgage Company, Las Vegas Mortgage Lender, Loan Programs, mortgage broker in las vegas, Mortgage Interest, mortgage loans, Mortgage Refinance Arizona, Mortgage Refinance California, Mortgage Refinance Nevada, real estate las vegas, refinance loans, VA Loans, VA Loans Las Vegas. Bookmark the permalink.

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