Arm Mortgages
Looking for a loan that puts a new house’s keys in your hands? You’ve come to the right place!
There are many lenders and mortgage programs out there that will fit your financial needs. Finding them is just a matter or understanding how they work and knowing where to look!
What are Adjustable Rate Loans?
Variable-rate or adjustable rate mortgages (ARM) are a type of home loan with an interest rate that changes over time. This means that the monthly payments will fluctuate during the duration of the loan. They are usually compared to their counterpart version, Fixed Rate Mortgages.
Generally speaking, initial interest rates for ARMs are considerably lower than the ones found in fixed rate loans…for some time, at least. Once that period ends, your mortgage interest rates – and its respective monthly payments – begin to go up or down depending on the market.
The thing to keep in mind with regards to adjustable-rate mortgages is that interest rates are unpredictable. Even though they have remained more or less stable over the past decade through both, up and down cycles across several years. For example, the U.S. has been seeing a surge in interest rates since 2016, while the previous five years’ rates remained low and flat.
Already have an adjustable rate loan on your sights? Use our mortgage calculator and make sure it’s the right one for you!
Adjustable Rate Loans Advantages:
- Your starting interest rate is typically lower than other kinds of loans.
- You can end up enjoying lower monthly payments in the first few months.
- Accessibility to higher price homes due to lower initial payments.
Adjustable Rate Loans – Notable Requirements
Different types of loans vary wildly on their qualification requirements.
While these might not be all the requirements to qualify for an Adjustable Rate loan, they are definitively essential to know up front!
- Adjustable rate loans usually have high credit score requirements (620 and up).
- It isn’t unusual for lenders to follow established guidelines for income and financial information.
- Loan amounts regularly top around $450,000 for single-family homes.
- Most conventional adjustable rate loans require a minimum down-payment of 5 percent.
- Rates can vary by lender, but they are typically based on the one-year LIBOR index.
- Terms are generally 30 years for most adjustable rate mortgages.
Conventional Loans & Accessibility – All You Need to Know:
While qualifications might be steeper when compared to other loan types, ARMs provide an excellent opportunity for people struggling with the initial stages of borrowing. Coming up with the money to cover down payments and other initial costs can leave a person drained of liquidity. That’s when the guaranteed years of low monthly payments shine the most.
When you are applying for an ARM, it’s essential to plan ahead and consider payments as if a raise on rates were guaranteed. This will help you organize and prevent any un-welcomed surprises further down the road.
That said, once you meet the qualifications and have a reliable income stream capable of handling fluctuations in interest rates, ARMs can be the perfect fit for your needs. Do keep in mind, though, that these loans tend to come in 30-year-long commitments. So, plan around this if you are thinking of selling your new home after a while.
Ready to get that Adjustable Rate Loan you’ve been looking for? Let us help!
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