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What’s up with ARMs?

As noted above, Bankrate’s survey shows the 5/1 ARM dropped by a whopping 16 basis points. (On a 5/1 ARM, the interest rate is fixed for 5 years and adjusted annually thereafter.) The 7/1 ARM fell 12 basis points to 3.33% and the 10/1 ARM fell 11 basis points to 3.49%.

There has been a focus lately on trying to generate ARM activity, says Jim Sahnger, mortgage planner for Schaffer Mortgage in Palm Beach Gardens, Florida.

“People are hungrier for ARMs right now than they are for fixed rates,” he says, adding that investor interest in adjustable rates is driving rates down.

Rates are artificially low right now, but that is likely to change down the line, which is what investors are considering.

“If you’re going to try to recapture a greater return at a certain point in time, then you might be willing to take a little less today with the expectation that you’re going to get more later,” Sahnger says.

Home prices move higher

Home prices increased 1.1% from January to February and were nearly 7% higher than they were in February 2015, according to data released Tuesday from CoreLogic. Additionally, prices are predicted to rise by 5.2% year over year from February 2016 to February 2017.

Mortgage applications rose 2.7% last week compared with the previous week, according to the Mortgage Bankers Association’s weekly survey. Refinances were up 7% while purchases fell by 2%.

Don’t allow the pressure of the homebuying season to heavily influence your purchasing decisions, advises Brian Koss, executive vice president at Mortgage Network in Danvers, Massachusetts.

“Be patient; be disciplined in your price range,” he says.

Remember to get a loan preapproval and figure out a comfortable budget.

“(Borrowers) shouldn’t just go out on a whim and then feel (locked) into something without having their numbers,” Koss says.

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30-year-mortgage-falls-to-nearly-3-year-low