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    More buyers choosing ARMs to lower purchase costs

    WASHINGTON – Dec. 4, 2018 – Rising interest rates are prompting more homebuyers to turn to adjustable-rate mortgages (ARMs), which come with potential financial risks. The mortgages typically come with lower initial interest rates, but they reset to market rates after five or seven years – a potential shock to borrowers who could then face much higher costs.

    The percentage of borrowers with ARMs rose to 8.2 percent in October, up from 7.2 percent in September, according to Ellie Mae’s Origination Insight Report.

    “As interest rates continue to rise, the percentage of adjustable-rate mortgages is increasing, as homebuyers are looking to take advantage of the best rates from their lenders,” says Jonathan Corr, president and CEO of Ellie Mae, a cloud-based platform for the mortgage finance industry. Freddie Mac reported last week that the 30-year fixed-rate mortgage averaged 4.81 percent compared to a 4.09 percent national average for 5-year ARMs.

    Ellie Mae’s report also showed that the time to close on all loans is on the rise: 45 days in October, up from 44 days in September. Broken out, the time to close on a purchase loan rose to 46 days, while the time to close on a refinance loan increased to 43 days.

    Also, the report showed that FICO scores of applicants averaged 727 in October.

    “FICO scores remain the highest we’ve seen in 2018, indicating that lenders are not yet loosening credit availability to attract the shrinking refinance market,” Corr says. “We’ll continue to watch this trend into the winter months.”

    Source: “Ellie Mae Origination Insights Report: October 2018,” Ellie Mae (Nov. 21, 2018)

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    Kareem Tannous

    Growing up in a small borough outside of Philadelphia, PA and then transplanting to Jacksonville, FL in 1998, I am a husband, brother, and son to a great hard working family. As a graduate from Jacksonville University and Walden University, I thoroughly enjoy the economics and finances of the real estate industry. Starting in the audit department at GMAC and progressively worked my way towards being the principal broker of my own mortgage and real estate firms while humbly educating students in higher education. I have been in real estate and finance over 25 years managing commercial and residential assets. Also, while originating mortgages, I have helped people to buy, sell, and e-valuate their real estate holdings. Today, I operate JRFS, Inc. and humbly educate undergraduate and graduate students the fields of accounting, finance, strategy, and business. Contact me anytime to discuss your real estate and finance goals. Kareem

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