Adjustable Rate Mortgages (ARMs) originating 3-5 years ago are starting to reach uncomfortable heights for homeowners in increasing numbers these days and many borrowers are not finding the market for a new mortgage as agreeable as they would like. While the mortgage business is slowing down a bit for lenders, homeowners can still receive low rates on a 30-year fixed rate mortgage and, should they choose to do so, on 1-, 3- and 5-year ARMs. Taking the latter route, however, is not currently a good option, as the market is seemingly “inverted”, meaning that the rates on the ARMs, typically lower than those on 30-year fixed rate loans, are roughly the same. With rates on the two mortgage types nearly identical, there is little reason for borrowers to go with the shorter-term loans.

Other problems that those forced to refinance are facing are lower FICO credit scores than they had when they originally financed the property. As a result, borrowers are often finding that not only have rates have gone up since they financed the first time around, but they’re also being forced to pay a premium in the form of points or higher rates as a result of their lowered credit score.

Also prevalent in the mortgage lending industry are newly-imposed, stricter underwriting controls and it is likely that many years will pass before we again see no-doc, 100% financed mortgages. In short, now that the nationwide real estate market has steadied (I’ll still not call it a “burst bubble”), some semblance of sanity will return to the lending and underwriting processes, making things a bit tougher for borrowers.

Tags: 1 year ARM, 3 year ARM, 30 year mortgage, 5 year ARM, adjustable rate mortgages, credit score, fico credit scores, fixed rate mortgage, mortgage business, mortgage lending, mortgage types, real estate bubble, term loans

Posted in Adjustable Rate Mortgages | No Comments »