If you recall the 2008 housing crash, you might remember how popular adjustable-rate loans (ARMs) then were. After years of virtually no ARMs, more people are now using them to buy a home. Why ARMs Are More Popular NowThis graph shows how the percentage of adjustable rate mortgages has increased in the last few years. It uses data from the MBA. This increase can be explained by a simple reason. Mortgage rates rose dramatically last year. Some homeowners chose this type of loan due to the higher borrowing costs. Why Today’s ARMs are Different from the Ones of 2008To put the situation in perspective, remember that these ARMs are not the same as the ones that were popular up until 2008. The loose lending standards were a major factor in the housing crisis. When a buyer received an ARM in the past, banks and lenders did not require proof of employment, assets, income etc. People were awarded loans they should not have received. Many homeowners were in trouble because they could not pay back loans they never qualified for. This time, the lending standards have changed. After the crash, banks and lenders are now verifying income, assets, employment and more. Today’s buyers must qualify for their loans, and prove they can repay them. Archana Pradhan explains the difference: “Around 60% Adjustable-Rate mortgages (ARM) originated in 2007 had low- or no documentation. . . In 2005, 29% ARM borrowers also had credit scores under 640. . . The current adjustable-rate mortgages do not carry the same risk as those from the housing crisis. They also have lower monthly payments, which could make homeownership more accessible to more people. If you are a first-time buyer and would like to know more about the lending options available to you to help you overcome your current affordability challenges, contact a trusted lender.

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