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Adjustable Rate Mortgage (ARM)

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Adjustable Rate Mortgage (ARM)

Flexibility and Initial Savings Adjustable-Rate Mortgages (ARMs) are an intriguing home loan option for a distinct reason. If you're open to starting with lower monthly payments and are comfortable with the potential fluctuations in interest rates over time, then an ARM could be the flexible financing solution that aligns with your homeownership journey.
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What is Adjustable Rate Mortgage (ARM) mortgage?

An Adjustable Rate Mortgage is a home loan product in which the interest rate adjusts over time based on a specified index and margins. This mortgage product contrasts with fixed-rate mortgages, where the interest rate remains consistent for the life of the loan. ARMs often start with lower interest rates during an initial period, typically followed by periodic adjustments based on market conditions. Understanding the Components of an ARM: Several key components form the structure of an ARM:

Benefits

Lower initial interest rates
Resulting in lower monthly payments during the initial fixed-rate period.
Potential cost savings during the initial fixed-rate period
Providing an opportunity to save money in the early years of homeownership.
Flexibility in the early years
Allowing borrowers to take advantage of lower rates and adjust their financial plans accordingly.
Ideal for short-term homeownership or expected income growth
Catering to those who anticipate changes in their housing needs or income level.

Requirements

Minimum 620 Credit Score
Most lenders require a minimum credit score of 620 for adjustable-rate mortgages.
5% - 20% Down Payment
Adjustable-rate mortgages typically require a down payment between 5% and 20%.
2% – 5% In Closing Costs
You’ll need 2% – 5% of the total purchase price to cover closing costs.
Debt-To-Income Ratio ≤ 50%
You’ll need a debt-to-income ratio (DTI) of no more than 50%.

Adjustable Rate Mortgage (ARM) Loan Options

10/6 ARM
The 10/6 Adjustable-Rate Mortgage presents the possibility for lower initial payments for the first ten years, with the rate adjusting every six months thereafter, providing a balance between stability and flexibility.
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FHA ARM
The FHA Adjustable-Rate Mortgage offers the opportunity for potentially lower initial payments, while accepting the fact that the rate may change over time, ideal for first-time homebuyers.
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VA ARM
The VA Adjustable-Rate Mortgage provides potential for lower initial payments, with the understanding that the rate may adjust over time, beneficial for our veterans and service members.
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