If you’ve been looking for a home here in the Denver metro area, you’ve probably felt how challenging affordability still is right now. That’s exactly why more buyers are starting to explore alternative financing options, including adjustable-rate mortgages, or ARMs.

Here’s what you need to understand about how they work, and whether they might make sense for your situation.

What Is an Adjustable-Rate Mortgage?

Since a lot of people aren’t familiar with this type of loan, let’s start with a simple definition. This is how Business Insider explains the difference between a fixed-rate mortgage and an adjustable-rate mortgage:

“With a fixed-rate mortgage, your interest rate remains the same for the entire time you have the loan. This keeps your monthly payment the same for years . . . adjustable-rate mortgages work differently. You’ll start off with the same rate for a few years, but after that, your rate can change periodically. This means that if average rates have gone up, your mortgage payment will increase. If they’ve gone down, your payment will decrease.”

Basically, one stays relatively stable over the life of the loan.

And the other can change, sometimes slightly and sometimes more significantly.

Of course, taxes and insurance can still impact any mortgage payment, but the key difference is that with an ARM, your monthly payment could shift over time.

Why Adjustable-Rate Mortgages Are Getting More Attention

So why are more buyers considering ARMs? It comes down to upfront savings. Business Insider explains it this way:

“Because ARM rates are typically lower than fixed mortgage rates, they can help buyers find affordability when rates are high. With a lower ARM rate, you can get a smaller monthly payment or afford more house than you could with a fixed-rate loan.”

And right now, according to Mortgage News Daily and the Wall Street Journal, the upfront rate on an ARM is lower than a 30-year fixed mortgage (see graph below):

In real numbers, that difference can add up. Research shows the typical buyer could save around $150 per month by choosing an ARM over a 30-year fixed loan.

That’s something I’ve been walking through with a lot of buyers lately, especially those trying to stay within a specific monthly payment range while still finding a home they love.

If you’re trying to make the numbers work, one of the first steps is to get pre-approved so you can see exactly what your options look like.

More Buyers Are Choosing Adjustable-Rate Mortgages Today

A growing number of buyers are willing to trade the uncertainty later for a lower payment now. Data from the Mortgage Bankers Association (MBA) shows the share of buyers choosing ARMs has increased, especially over the last few years (see graph below).

This doesn’t mean ARMs are becoming the go-to option for everyone. It only means some buyers are opting for this type of mortgage, so they can still buy today.

And if you remember the housing crash, it’s fair to question whether this trend is a concern. The reality is today’s lending standards are much stricter.

Lenders now evaluate whether buyers could still afford the payment if rates increase. That means this shift is less about risk and more about strategy.

The Trade-Off – What You Need To Consider

If you’re considering an ARM, it really comes down to your situation and your comfort level with risk.

An ARM may make sense if you plan to move before your rate would adjust or if you expect you’ll make a higher income in the future. But there are trade-offs you need to think through.

For example, once the fixed period ends, your rate can adjust, and your payment could increase, potentially by a meaningful amount depending on where rates are at that time.

And keep in mind, there’s also no guarantee mortgage rates will come down in the future, which means refinancing later isn’t always an option. That’s why it’s important to think through your plan, understand your long-term earning potential, and work closely with a trusted lender before you choose an ARM.

If you're already thinking about next steps, you can also start your home search to see what’s available within your target price range.

Bottom Line

Adjustable-rate mortgages are getting more attention because they can make buying a home more affordable in the short term. But they’re not the right fit for everyone.

The key is understanding how they work, weighing the risks, and deciding whether they align with your goals. If you’re trying to figure out what makes the most sense for your situation, feel free to reach out to me. I’m happy to walk you through it and help you map out a plan.