Despite their bad reputation, more and more people are looking to ARMs as an alternative to traditional mortgages as they can offer lower interest rates. However, many of these lower rates are with low down payment ARMs. Unfortunately, these options may not be available to everyone due to recent changes in the market and regulations.
In the past, many people used ARMs as a way to get a home with a smaller down payment. But in 2008, the mortgage meltdown took care of that. Regulations now require most ARMs to have a larger down payment, usually 25%, before they can be approved. This means that for the majority of homebuyers, they will now need to put down a larger chunk of money before they can get access to an adjustable rate mortgage.
The good news is that there are still some low down payment ARMs available. Some lenders have special programs which allow them to offer ARMs with minimum down payments. But these deals usually come with stricter requirements, such as higher credit scores and larger down payments. And even then, there is no guarantee that these lenders will be able to help you.
With the new restrictions on low down payment ARMs, it is important to educate yourself on all of your options. If you want the benefits of an adjustable rate mortgage, make sure to shop around and find a lender who can provide you with a good deal. It's also important to remember that ARMs can be a great option if used properly, but they should not be entered into lightly. Always weigh the pros and cons before making any decisions and understand how an ARM works.
Adjustable rate mortgages (ARMs) have been a popular choice for homebuyers in the past largely because they offer lower interest rates than traditional mortgages. However, due to recent changes in the market and regulations, low down payment ARMs are no longer as accessible as they used to be. New regulations require most ARMs to have a minimum 25% down payment before they can be approved. That means that the majority of buyers will need to save up more money before they can qualify for an ARM.
Fortunately, there are still some lenders who offer low down payment ARMs, though these deals often come with stricter requirements such as higher credit scores and larger down payments. It’s important to do research and shop around for the best deal before committing to an ARM. Although they can offer lower interest rates, they should not be entered into lightly and it’s important to understand all the risks involved. If done correctly, an ARM can be an excellent financial tool.
This article was contributed on Oct 19, 2023
