Adjustable-Rate Mortgages: How Brokers Can Use ARMs to Solve Affordability Challenges in 2026

One product that may help with costs in today's market is the adjustable-rate mortgage (ARM).

Click to navigate:

1. Why ARMs Are Regaining Momentum
2. Today's ARMs Are Different From the Products of the Past
3. Borrowers Who May Benefit from an ARM
4. How Brokers Can Lead the Affordability Conversation
5. Why ARMs Matter in Today's Competitive Market
6. Partnering With Newrez Wholesale for ARMs

As affordability continues to challenge homebuyers across the country, mortgage brokers are increasingly being called upon to deliver financing solutions that help borrowers achieve homeownership.

One product that may help with costs in today's market is the adjustable-rate mortgage (ARM).

In low-rate environments, ARMs are often overlooked in favor of fixed-rate mortgages (FRMs). However, today's lending environment has created renewed demand for products that may offer lower initial rates than FRMs. For brokers, ARMs can help expand financing options for borrowers, which means more opportunities to close loans in a challenging market.

Why ARMs Are Regaining Momentum

Today’s housing market continues to face a combination of pressures:

• Elevated home prices
• Fixed mortgage rates that have not dipped below 5% since 2022¹
• Limited housing inventory²
• Inflation reducing consumers’ disposable income³

As a result, many prospective homebuyers are searching for ways to reduce their initial housing costs while maintaining purchasing power.

ARMs that offer lower introductory interest rates may help some borrowers. A reduced rate means a lower monthly payment during the initial fixed period.

For brokers, this creates a way to continue financing conversations that might otherwise end with a borrower deciding to delay their purchase.

Today's ARMs Are Different From the Products of the Past

One challenge brokers may face when discussing ARMs is overcoming outdated perceptions.

Some borrowers may still associate adjustable-rate mortgages with the products that contributed to the housing crisis. However, the ARM landscape has changed since post-2008 regulatory reforms.

Today's ARM products are supported by:

• Full income and asset documentation requirements
• Ability-to-repay standards
• Qualified Mortgage (QM) regulations
• Clearly defined adjustment caps
• Enhanced consumer disclosures
• Stronger underwriting guidelines

Mortgage products like Option ARMs and negative amortization products are often associated with the 2008 financial crisis. However, these are not generally part of standard QM lending and are far less common in today’s market.

Before deciding on a loan, borrowers should understand how modern ARMs work.

Borrowers Who May Benefit from an ARM

Not every borrower is a good candidate for an adjustable-rate mortgage. However, several borrower profiles may align particularly well with ARM financing.

Borrowers With Shorter Homeownership Timelines

Many homeowners do not stay in the same property for 30 years. Borrowers who anticipate relocating within five to ten years can benefit from a lower initial rate and may be able to sell the property before any adjustment occurs.

Borrowers Who Expect to Refinance

For homebuyers likely to refinance within five to ten years, the ARM’s initial savings can improve affordability or enhance buying power. Borrowers should be prepared for the possibility that they may not be able to refinance at a desirable rate or may not be able to refinance before ARM payments readjust. They should be prepared to make payments even if they are not in a position to refinance.

First-Time Homebuyers

For first-time buyers struggling with affordability, a lower introductory payment can create a more manageable path to homeownership while allowing them to preserve or increase cash reserves.

Professionals With Expected Income Growth

Borrowers in fields where there’s often potential for long-term income growth, such as medicine, law, or technology, may find ARMs helpful. A lower initial rate can ease costs early in their careers, and higher future earnings could help them manage increased payments if rates rise. However, borrowers should be able to manage potential payment increases regardless of expected income growth.

How Brokers Can Lead the Affordability Conversation

Today's borrowers are looking for guidance, not just rates. Brokers are uniquely positioned to help borrowers evaluate financing options based on their individual goals rather than relying solely on product assumptions.

Successful ARM conversations often include:

• Expected length of homeownership
• Future relocation plans
• Income growth projections
• Monthly payment objectives
• Long-term financial goals
• Refinance opportunities

Rather than leading with product features, brokers can focus on understanding the borrower's strategy and determining whether an ARM supports that strategy.

This approach can help borrowers choose the right loan product for their timeline and budget and feel heard by their broker.

Why ARMs Matter in Today's Competitive Market

When affordability challenges limit borrower options, brokers can help by having multiple loan structures available.

ARMs can help brokers:

• Increase borrower purchasing power
• Lower initial monthly payments
• Improve loan qualification opportunities
• Offer alternatives to payment-sensitive borrowers
• Differentiate their advisory approach
• Expand homeownership opportunities

Borrowers might not wind up choosing an ARM, but it’s important for them to understand all their available options before making a financing decision.

Partnering With Newrez Wholesale for ARMs

At Newrez Wholesale, we understand that every borrower has different priorities and financial means. That’s why we provide brokers with access to a broad range of financing solutions designed to meet the evolving needs of today's housing market.

Used thoughtfully, ARMs can help brokers expand options and support borrowers who might otherwise struggle to move forward.