Adjustable-Rate Mortgage
An Adjustable Rate Mortgage (ARM) starts with an introductory or teaser interest rate that’s often lower than a traditional fixed-rate loan. The introductory rate period can last anywhere between the first 5, 7, or 10 years of the loan. During the initial period, the interest rate and monthly payments don’t change. After the initial period, the rate adjusts periodically based on the index (rate set by market forces) either once a year or every 6 months, depending on the ARM terms.
Benefits of an Adjustable-Rate Mortgage:
- Lower initial rate for the first few years means monthly payment savings
- Could offer lower interest rates than fixed-rate loans
- Rate adjustments have caps to keep them from going too high
- The interest rate and monthly payment may increase or decrease during the adjustable period. Homebuyers should consider their financial situation carefully and be prepared for potential monthly payment adjustments in the future.
- Good option for buyers who plan to move or refinance before the initial rate period ends
Be prepared by knowing what items and documents a lender will request: Loan Checklist
Your interest rate stays fixed for the life of the loan.
Your interest rate changes according to a preset schedule.
Popular with first-time buyers, this loan has a minimum 3.5% down payment and low interest rates.
Loan for eligible veterans and active-duty service members, with no down payment in most cases.
Shopping for a higher-priced property? Lock in a competitive rate and stable monthly payments on your ultimate dream home.
USDA Loans offer no-money-down mortgages for rural and suburban buyers.