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ADJUSTABLE-RATE MORTGAGES (ARMs)

Home loans with a variable interest rate after an initial fixed period

Loan Programs > Adjustable-Rate Mortgages

Adjustable-Rate Mortgage Quick Facts

0% Down

Minimum Down Payment

580Credit

Minimum Credit Score

55%DTI

Max Debt-to-Income Ratio

What is an Adjustable-Rate Mortgage (ARM)?

With an Adjustable-Rate Mortgage (ARM), the interest rate stays constant for a specified loan period and then fluctuates based on market conditions. An ARM typically has a lower interest rate than a 30-year Fixed-Rate Mortgage for the initial fixed-rate period. However, at the end of the initial fixed-rate period, the interest rate becomes variable and may move up or down depending on the direction of the mortgage index it is associated with. FHA, Conventional, VA, Jumbo, and Refinance Loans have ARM options.

What are the benefits of an ARM?

ARMs offer the following features:

  • May be a good choice for those planning to move before the end of the initial fixed period.
  • An ARM occasionally has a lower interest rate and monthly payment than Fixed-Rate Mortgage for the initial fixed-rate period.
  • Payment caps limit the amount of rate change that can occur in certain time periods.
  • Borrowers can refinance at the end of the initial fixed period.

Who may benefit from an ARM?

An ARM may the right fit for you if:

  • You don’t plan to own your home for longer than the initial fixed-rate period, or plan to refinance when the fixed period ends.
  • You want a lower initial interest rate and monthly payment.

Sample Loan Scenarios:

This loan is an Adjustable Rate Mortgage. The interest rate and principal and interest payments are subject to increase after consummation. After the initial period, the interest rate and payment will adjust every year based on the sum of the 12-month LIBOR index (at 2.95% as of 10/11/2018) plus a margin of 2.25% up to a maximum annual cap of 2% and lifetime cap of 6%.

10-year: Based on the purchase price and loan amount, this transaction would have 36 initial monthly principal and interest payments at $1,658.21, based on the initial rate of 4.50% (as of 10/19/2018), followed by 12 monthly principal and interest payments at $1,816.77, based on the rate of 6.50%, and] 72 monthly principal and interest payments at $1,816.77, based on the fully indexed rate of 10.50%.

30-year: Based on the purchase price and loan amount, this transaction would have 36 initial monthly principal and interest payments at $810.70, based on the initial rate of 4.50% (as of 10/19/2018), followed by 12 monthly principal and interest payments at $1,011.31, based on the rate of 6.50%, and 312 monthly principal and interest payments at $1,463.58, based on the fully indexed rate of 10.50%.

Texas
Meet Your Mortgage Expert for
Adjustable-Rate Mortgages

Jennifer Jones

Loan Officer | NMLS #1714289

I love helping our customers accomplish something that they never new possible. Home Ownership is something all Americans should experience.

Corp NMLS #214519 | Equal Housing Lender

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