Financial Profile Of ARMs Borrowers Reduces Risk Of Housing Crash
Summary
The result is that borrowers using ARMs are more likely to be affluent households with larger down payments, a new Zillow analysis finds, adding that this reduces the risk of a housing market crash. "Housing market conditions and the profile of ARM borrowers should bring comfort to anybody scarred by the memory of risky lending practices during the Great Recession," said Zillow senior economist Nicole Bachaud. “Borrowers today,” she continued, “are more financially prepared for home buying, and the housing market has a much stronger outlook than the last time ARMs were this popular. While not the best option for every buyer, ARMs can be beneficial for households on solid financial footing that can stomach the possibility of higher payments down the road." Home buyers who recently financed their purchase with an ARM appear to be better positioned than borrowers overall, with higher median incomes and larger down payments, Zillow said.