If you’re considering buying a home, it’s important to understand the different types of mortgages available. The two most common types of mortgages are fixed rate and adjustable rate. Fixed rate mortgages have the same interest rate over the entire life of the loan, while adjustable rate mortgages can have changing interest rates that fluctuate depending on market conditions. Let’s take a closer look at the differences between fixed rate and adjustable rate mortgages.

Fixed Rate Mortgages

Fixed rate mortgages are ideal for home buyers who want to stick with a budget. With this type of mortgage, your monthly payments will remain consistent throughout the life of the loan—no matter what changes in market conditions or interest rates might occur. Fixed rate mortgages typically have terms from 15 to 30 years, although some lenders offer longer terms as well. This is good for budgeting, because it allows you to know exactly what your payments will be each month.The downside is that you could end up paying more than necessary if interest rates drop after you sign your loan agreement. Additionally, if you want to refinance your loan at any point during its term, there may be fees involved depending on your lender and loan terms. 

Adjustable Rate Mortgages

An adjustable-rate mortgage (ARM) has an interest rate that changes over time according to market conditions and other factors like inflation. ARMs usually have initial fixed-rate periods ranging from 5 to 10 years, after which they adjust annually or semi-annually (twice a year). With an ARM, your monthly payments could potentially decrease or increase depending on what happens with interest rates in the market. This type of loan is attractive because they often come with lower initial interest rates than a fixed-rate mortgage, thus making them more affordable initially; however, this also means that payments can change significantly over time if interest rates rise dramatically in the future.  As such, ARM loans carry more risk than fixed-rate loans since you could end up paying much more than expected due to increases in monthly payments caused by rising interest rates.Choosing between a fixed rate or adjustable rate mortgage comes down to understanding your financial needs and goals over time. If you don’t expect major changes in income or expenses anytime soon, then a fixed-rate option may be best for you since it offers stability and predictability when budgeting for monthly payments throughout your loan term. If you anticipate needing some flexibility when it comes to budgeting for your mortgage payments or want lower initial costs, then an ARM might be worth considering; however, keep in mind that this type of loan carries more risk due to potentially increasing payments over time if interest rates go up significantly in the future. Ultimately only you can decide which type of mortgage is best suited for meeting both short term and long term financial objectives. Potential home buyers should weigh all options carefully before committing either way so they make sure their decision works best for them now and into the future!

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One of our Loan Originators, Angie Vance, is here to give share some do’s and don’ts on the home loan process.

Gulfside Mortgage Services is your best source for the lowest-rate financing on the market. Why? Because as mortgage brokers we access mortgages at wholesale rates and pass the savings on to you.

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According to the Mortgage Bankers Association, adjustable-rate mortgages are now reaching the highest level since 2008 and are expected to continue to rise. Despite their role in the 2008 housing crash, adjustable-rate mortgages are skyrocketing in popularity. Their re-emergence should not worry you, though lending standards have tightened since the housing crash. Experts say the mortgage industry is in a safer space for both borrowers and lenders.

ARMS, adjustable-rate mortgages, are home loans with an interest rate that adjusts over time depending on the fluctuation of market rates. They’re less predictable than fixed mortgages because they tend to change periodically. They are generally considered ‘risky’ because borrowers run the chance of paying much higher mortgage payments than they may have budgeted for. On the other hand though, the borrower could pay lower mortgage rates as well depending on the mortgage market, which is why ARM mortgages are appealing.

Roughly 35% of all mortgages were adjustable rates during the mid-2000s housing boom. During the Covid-19 housing market, ARMs regained momentum as the Federal Reserve’s rate raises put pressure on mortgage rates. Applications for ARMs are predicted to continue to rise. Buyers are utilizing ARMs to combat higher rates. Although the 2008 crash led many ARMs borrowers into foreclosure, this will not happen again. Our lending standards are different now which means that today’s borrowers aren’t walking through a financial battleground like those before. There have been many improvements in the real estate industry in areas such as underwriting, technology, and quality control. The Dodd-Frank Act was created as a direct response to the financial crisis of 2008. It addresses issues in banking and lending that contributed to the economic turmoil.

Overall, the mortgage industry has evolved into a healthier space for both borrowers and lenders which means that ARMs mortgages should not cause you distress. Speak with your mortgage lender about your options to have peace of mind.

One source: https://www.businessinsider.com/adjustable-rate-mortgages-helped-trigger-housing-crash-not-this-time-2022-5

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Before the start of 2022, many in the real estate industry believed that home prices would decelerate in growth this year. The latest real estate firm to change up its 2022 forecast was Fannie Mae. Last year, the agency predicted that the average home price would climb 7.9% year, and now Fannie Mae is reporting an 11.2% price jump. If home prices rise to that level, it would mark a deceleration from the current rate. Fannie Mae believes the relief from the market will come, but it just won’t happen until the end of 2022 going into 2023.

For most of the pandemic, supply has been an issue. Many believed housing inventory would increase. However, housing availability levels have only gotten worse. Fannie Mae is now stating the median home price in 2022 will jump from $355,000 to $384,000. Inflation has been hitting consumers hard as prices rise at the fastest rate in nearly 4 decades. Mortgage rates are spiking as inflation rises as well.

Though our current economic market does not look promising, there is still hope for a cool-down period in the housing market. Hopefully, with higher rates, the market will become less competitive. If that happens, home growth could finally become normal again, or as close to normal as possible, given our current climate. If buyers are being priced out, then there should be fewer bidding wars which should slow house price appreciation. This is believed to begin at the start of 2023. This cooldown will not be like it was when the market crashed in 2008. Instead, we should expect to see fewer bidding wars and high-stakes competition. Home prices will continue to surge, which is not great news for first-time buyers, but from a macro perspective, a strong housing market could be what the United States needs to evade a potential recession. 

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   If you are in the market for a new home, chances are a well-meaning friend or family member has offered their opinions on why now is the worst time to purchase a home. This opinion doesn’t just come from family and friends and doesn’t always rely on market conditions. Regardless, the potential for frustration and exhaustion remains. But does this have to be the case? And perhaps more importantly, is this the case? Although the constant drumbeat of skyrocketing costs and low inventory is enough to put many homebuyers’ plans on hold, it doesn’t and shouldn’t, have to be the case. Purchasing a home should be an exciting, not an exhausting time. The struggles the economy has had, and are having, during the pandemic are all too real. What is the recent past had been a buyer’s market has shifted into a strong seller’s market. But does a competitive market necessarily equate to Buyer Fatigue? Should it? There are a great many variables that make home-buying a smart move, regardless of market conditions. Here are five key strategies (one being a must-have!)  that can set homebuyers on the path to their dream home without frustration and without fatigue. 

• Be prepared. While it’s true that time isn’t necessarily on the homebuyer’s side during a seller’s market, collecting the required documents, before house hunting begins in earnest, will save valuable time and can put buyers in the perfect position to have their offer moved to the top of the list. Pay stubs, tax returns, bank statements, personal and business references, should be gathered in advance.
• Be available. Rather than waiting for a more traditional, buyer-friendly time to see a house, such as Saturday afternoons, make yourself available during the day, or during evenings to tour a home.
• Be knowledgeable. Real estate agents stay on top of interest rates and know what low, or high, rates can mean throughout the course of a home loan. Buyers should also keep themselves aware of interest rates and the housing market in general. Researching prices houses are selling for in their preferred area gives buyers a range of current prices.
• Be flexible. Buyers willing to make concessions, where possible and reasonable, can turn a good offer into a winning bid. Flexibility on issues such as extending closing and move-in dates could go a long way in setting one offer above the rest. Be willing to negotiate and compromise.

 And the one must have: 

• Be pre-approved, not pre-qualified.

 With interest rates at near-record lows, these strategies can make purchasing a home now a very smart and fatigue-free move for the future.

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