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  • Adjustable-Rate Mortgage

  • An adjustable-rate mortgage (ARM) is a loan in which the interest rate may change periodically, usually based upon a pre-determined index. The ARM loan may include an initial fixed-rate period that is typically 3 to 10 years. The interest rate then may change (adjust) each year thereafter once the initial fixed period ends.  

    ARM loans typically feature lower rates and monthly payments than comparable fixed-rate loans during the initial rate period, but rates could increase or decrease once the initial rate expires.

     

  • Benefits and Considerations

     

    The best short-term rates

    Conventional ARMs typically feature lower interest rates and APRs during the initial rate period.

    Low monthly payments

    An adjustable-rate mortgage (ARM) lets you keep your monthly payments low during the initial term of your home loan, which gives you the option to pay down your mortgage faster.

    Refinancing options

    Conventional ARMs are available for refinancing your existing mortgage, too.

    Requirements and Qualifications

    • Credit History - Conforming loans (loans that conform to Fannie Mae and Freddie Mac guidelines) are a good choice for borrowers with good to excellent credit, which generally means a FICO score of 700 or higher. There are also established guidelines for income and other personal financial information.
    • Loan Amount - The loan amount for a conforming ARM is generally up to $453,100 for a single-family home, though limits may be higher in regions where home prices are higher. Jumbo ARMs allow you to exceed the conforming loan limit to borrow for a higher-priced home.
    • Down Payment - Most conventional ARMs will require at least a 3% to 5% down payment. For loans with lower down-payment requirements, explore government-backed mortgages like VA loans and FHA loans.

    ARMs are a great option, but they're not the only option. Contact Residential Funding Consultants to learn more and find out which mortgage option may be the best fit for you.