The adjustable-rate mortgage (ARM) is a home loan with an interest rate that is fixed for a set amount of time, then resets and adjusts up or down periodically, per the terms of the loan. We offer ARMs that have a 5, 7, or 10 years fixed period. Remember, the longer the fixed period of the loan, the higher the rate (typically but NOT always).
ARMs come with interest rate floors (lowest interest rate you can pay) and ceilings (highest or maximum rate you can pay), which are commonly referred to as ‘caps’. ARM caps protect both you and your lender. The floor protects lenders from losing money on loans if the index decreases dramatically. The ceiling marks the highest possible rate that the borrower can pay on a mortgage, which protects you from paying an outrageous rate if the index suddenly climbs. In order to protect lenders and borrowers from possible foreclosures in the future, the borrower must qualify for the highest possible payment. Some borrowers with higher debt-to-income (DTI) ratios may not be able to qualify for an ARM loan.
WHEN AN ARM MAKES SENSE TO YOU
*All loans are subject to underwriting or investor approval. Other restrictions may apply. This is not an offer of credit or a commitment to lend. Guidelines subject to change.