Adjustable Rate Loans (ARM) in Sacramento, CAUnderstanding Home Loan & Mortgage Adjustable Rate Loans
Adjustable Rate Loans
Looking for your mortgage payment to be the same every month? Then a fixed rate loan, may be right for you. A fixed-rate mortgage loan provides you with the security of having the same interest rate over the life of the loan
Fixed rate loans come in a variety of loan terms, including 15, 20, and 30 year terms. The monthly principal and interest payments will be predictable, which makes it easy to budget every month. May be a good choice if you plan to stay in your home for a long time.
Feel at ease from rising interest rates for the life of the loan, no matter how high interest rates go.
What’s an adjustable-rate mortgage?
An adjustable-rate mortgage (ARM) is a loan in which the interest rate may change periodically, usually based upon a pre-determined index. The ARM loan may include an initial fixed-rate period that is typically 3 to 10 years. The interest rate then may change (adjust) each year thereafter once the initial fixed period ends. For example, with a 5/1 ARM loan for a 30-year term, your interest rate would be fixed for the initial 5 years and could fluctuate up or down each subsequent year for the next 25 years.
ARM loans typically feature lower rates and monthly payments than comparable fixed-rate loans during the initial rate period, but rates could increase or decrease once the initial rate expires. While many home buyers prefer the security of a fixed-rate mortgage, an ARM can be a good choice, too – especially if you know you’ll be moving within the next few years.
3- and 5-year ARMs
3/1 ARMs and 5/1 ARMs generally provide the lowest interest rates and monthly payments during the initial rate period – ideal for those who don’t want a long-term mortgage.
10-year ARMs mortgages
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Adjustable Rate Benefits and Considerations
The best short-term rates
Low monthly payments
Adjustable Rate Requirements and Qualifications
Conforming loans (loans that conform to Fannie Mae and Freddie Mac guidelines) are a good choice for borrowers with very good credit, which generally means a FICO score of 740 or higher. There are also established guidelines for income and other personal financial information.
The loan amount for a conforming ARM is generally up to $424,100 for a single-family home, though limits may be higher in regions where home prices are higher. Jumbo ARMs allow you to exceed the conforming loan limit to borrow for a higher-priced home.