Mortgage Industry Will Soon Be ARMed To The Teeth
Summary
According to a new report by Redfin, the typical homebuyer could save an estimated $15,582 over five years, or roughly $260 per month, by taking out an adjustable-rate mortgage. Scores of borrowers were drawn to ARMs in the early 2000s due to their lowest initial “teaser rates” and option for a 0% down payment. Today, banks do more due diligence to determine whether buyers will be able to cover the increased costs when the loan resets. For example, Bay Equity Home Loans, Redfin’s mortgage company, requires a down payment of at least 5%, a minimum credit score of 620, and a debt-to-income ratio of no more than 50%. For certain types of ARMs, borrowers may face fees or penalties if they refinance or pay off their loan early, according to Redfin Deputy Chief Economist Taylor Marr.