5 housing trends for spring

Mortgage » 5 Housing Trends Spring 2014

ARMs are back because rates are low

Increasing numbers of homebuyers have been considering adjustable-rate mortgages, since mortgage rates climbed from last year's lows.

Adjustable rate mortgages, or ARMs, generally have a fixed-rate period of five or seven years and after that, the rate resets annually.

Read: Low ARM rates come with risk.

One in 10 home-purchase mortgages issued in 2013 had an adjustable rate, according to a recent survey released by Freddie Mac. ARMs will continue to gain back some favor with mortgage borrowers this year, says Freddie Mac's vice president and chief economist Frank Nothaft.

Buyers dig big ARMs

ARMs have especially been popular with buyers who need larger mortgages, or jumbo loans, which are above the conforming limits set by Fannie Mae and Freddie Mac, says Jordan Roth, senior branch manager for GFI Mortgage Bankers Inc. in New York.

"There's a tremendous savings opportunity with an adjustable-rate mortgage," he says.

But ARMs aren't for everyone. Before getting an ARM loan, buyers should consider how long they plan to own that house and the maximum payment amount they could afford if rates rise after the fixed period, he adds.

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