When Naperville homeowners stand back and survey the Big Picture of how home loans are being applied for nationally, they are seeing a pretty predictable landscape. For the first week in August, the Mortgage Bankers Association (they survey three-quarters of all home loans) tells us that applications were up a bit (.2%); 63% of them were refinances; and that interest rates rose a few hundredths of a percent.
But what, one might wonder, has become of the ARMs race? During the height of the real estate boom, Adjustable Rate Mortgages were all the rage. With property values seemingly permanently on the rise, it made sense to assume that when the time came for the low introductory rate to adjust upward, any homeowner could simply refinance (probably into another low-interest ARM).
Now that fixed-rate home loans’ interest rates are increasing, you might assume that ARM loans would become popular once more. Not necessarily: “ARM share of activity remained constant at 6% of total applications,” reported the Mortgage Bankers Association. This while the HARP (Homeowners Affordable Refinance Program) share of refi applications was attracting six times that many. Why is this newsworthy for people looking to buy a home in Naperville? It probably indicates a maturing attitude by most borrowers — which bodes well for the stability of our overall market.
As a long-term strategy, ARMs can be something of a gamble. Their low initial “teaser” rates can tempt borrowers into a loan that can’t be readily repaid. But ARMs may actually be a reasonable gamble for those who do not plan to remain in their homes for long.
“A fixed rate isn’t for everybody,” one recent borrower is quoted as saying. “We know we’re moving, so there’s no point in paying for a guaranteed rate if we won’t use it.”
As of last week, rates on 30-year fixed-rate mortgages for conforming home loans ($417,500 or less) averaged 4.61%, while rates on five-year ARM home loans were unchanged at 3.39%. In all cases, getting qualified for a loan is an important part of buying a home in Naperville – as is working with an agent who helps you every step of the way!
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