Adjustable Rate Mortgage

An adjustable rate mortgage (ARM), is a loan in which the interest rate varies according to a predetermined schedule. The initial interest rate will be fixed for an allotted period of time, after which it is reset periodically. For example, a 5/1 ARM locks in the current interest rate for five years. After that, however, the rate for that particular product will change based on a predetermined index + margin with a cap. ARMs could start with better interest rates than fixed-rate mortgages, in order to compensate the borrower for the risk of future interest rate fluctuation. If you only plan to live in your new home for a few years, this could be a helpful option.

Benefits of an Adjustable Rate Mortgage:

  • Potential to lock in a low interest rate and, if needed, sell your home before it rises
  • Could offer lower interest rates than fixed-rate loans
  • Rate adjustments could have caps to keep them from going too high
  • Rates could possibly go down, saving you money

What You Need:

  • Your driver’s license
  • Your social security card
  • Payment stubs for the past month
  • Contact information for your landlord
  • Copies of your past two tax returns if you are employed
  • Copies of your past three tax returns if you are self employed
  • An accounting of regular monthly bills, including account numbers
  • A profit and loss statement for the current year if you run a business
  • Three months of statements for all of your savings and investment accounts
Additional documentation may be requested.