The down payment requirement for Adjustable Rate Mortgages (ARMs) dropped today to 5% from the previous 10% requirement. This is great news for many homebuyers. ARMs currently make up 7% of loan applications. This figure should increase now that Fannie Mae allows for 5% down with this product.
Low down payment mortgages, classified as less than 10% down, currently account for nearly 40% of all purchase loan originations. With this adjustment, conventional ARMs are now in play for “low down payment mortgages.”
I think this will be a great option for many first-time homebuyers or repeat homebuyers. When I bought my first house, it was with an FHA 5/1 ARM loan as I knew it wouldn’t be my “forever home.” After 3 years I refinanced to a fixed rate once I had enough equity to drop mortgage insurance.