Adjustable-rate mortgages offer a low-cost entry for buyers facing 6% fixed rates

Borrowers may find lower introductory rates and easier qualification standards, including debt-to-income ratios up to 50%, by opting for adjustable-rate mortgages. These loans provide a fixed rate for an initial period—typically three, five, seven, or 10 years—before entering an adjustment period. This shift comes as the average 30-year fixed-rate conforming mortgage stands at 6.276%, with 30-year FHA, VA, and USDA loans averaging 6.067%, 5.875%, and 5.962% respectively. The Federal Open Market Committee maintained the federal funds rate at 3.50% to 3.75% during its March 17-18 meeting. Once the introductory period expires, ARM rates fluctuate based on the Secured Overnight Financing Rate (SOFR) plus a lender-set margin typically ranging from 2% to 3.5%. The risk of this fluctuation is quantified by the rate caps; a rise from 7% to 12% on a $400,000 principal would increase a monthly payment by $1,453.