FirstBank FTHBPacket FinalNoBleeds - Flipbook - Page 16
ADJUSTABLE RATE MORTGAGE (ARM) LOANS
An adjustable rate mortgage is a type of loan where
the interest rate varies through the life of the loan.
The starting interest rate is fixed for several years
(typically 3 to 10 years), but then resets periodically.
People choose an adjustable rate mortgage for
several reasons, most notably for a lower initial
interest rate that keep your monthly payments low
during the initial term of the loan.
– but will not exceed the loan’s interest rate cap.
ARMs can be difficult to understand. Because of
the flexibility lenders have in the margins, caps
on interest rates and other elements of the loan,
those with little experience can get quickly be
overwhelmed. And because of this variation, it’s
important to compare the different types of ARMs
using a mortgage calculator.
There are many combinations of ARMs, and that’s
why is critical to understand the specific terms of
your loan. For example, a 5/1 ARM means a fixed rate
for five years that afterwards may adjust annually
Minimum credit score and down payment: Most
conventional ARMs require a credit score of 620 or
higher. They also require at least a 5 percent down
payment and optimally up to 20 percent or more.
Jumbo or non-conforming loans facilitate financing
for properties in higher price ranges where loan
amounts are necessary that exceed conforming
limits set by the Federal Housing Finance Agency
Jumbo loans are available for owner-occupied
second homes and investment properties, have
fixed or adjustable rates (ARM) and can be used to
purchase, refinance and cash-out.
Eligible properties include single family, multi-units