Adjustable-Rate Mortgage (ARM)
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More About ARM
Who Are Adjustable-Rate Mortgages Best For?
If you want to pay less money at the start of your loan, an ARM may be the right mortgage for you.
The ARM is great for people who plan to pay their mortgage off quickly, plan to live in the house for only a short time or foresee their income increasing in the next few years.
How Do ARMs Work?
With an ARM, you'll start with a low fixed interest rate for a set period of time — usually 5, 7 or 10 years. After that, your interest rate may change every 6 months or once a year, fluctuating with the market.
That means your monthly mortgage payment could go up or down twice a year. But your rate will never increase more than 5% of the original rate.
How Do I Qualify For An ARM?
- General minimum 3% - 5% down payment
- Minimum qualifying FICO® Score of 580 - 620
- Debt-to-income ratio (DTI) of no more than 50%
- Maximum loan-to-value (LTV) of 95%
Adjustable-Rate Mortgage Benefits
- A key benefit of an ARM is that the initial rate is typically lower than a fixed-rate mortgage, which makes monthly payments more affordable.
- Caps limit how much your interest rate and payment can rise over the life of the ARM loan.
- An ARM can be a wise choice if you’re planning to pay off the loan in full, or sell your home, before the adjustment period kicks in.
- For many people, the initial fixed-rate period matches how long they’ll be in their home before they move.
- There’s a possibility your payment could go down if interest rates fall.
Benefits Of Getting An ARM Loan
- and work at whatever pace is convenient for you.
- Find the lenders to understand whether an ARM is right for you.
- With certain lenders, after you close your loan, you can manage your mortgage online without any hidden fees.
- Also, you can find lenders that have no prepayment penalties if you pay off your loan early.
