Adjustable Rate Mortgage Loans (ARM)
An ARM mortgage loan comes with an interest rate that can change periodically
Some of these loans can come with really low interest rates, so they may have lower monthly payments, but the lender passes some of their risk to the borrower so they can adjust your interest rate over time with changing market rates as needed.
Adjustable Rate Loan Requirements
Like conventional loans, having a good credit score is essential for qualification. All lenders will review your debt to income ratio, credit score, and down payment requirements.
Adjustable Rate Loan Benefits
It can be easier to qualify for an adjustable rate loan, since the borrow assumes some of the risk usually held by the lender
Lower monthly payments and interest rates
Your interest rate might decrease over time if the market decreases
You might qualify for a larger property loan
You can opt for flexible payments options
Adjustable Rate Loan Disadvantages
After your fixed-rate period ends, the interest rate can move up or down based on the index it is tied to. This can cause your monthly payment to increase outside of your budgeted monthly amount.
Buyers may purchase more house than they can really afford.
With an unknown payment amount, your monthly budget planning becomes more difficult.