Adjustable Rate Mortgages

If you are a 1st time home buyer and are financially stretched; the FHA adjustable (ARM) mortgage, may be the mortgage product for you! The payments are low in the beginning of a adjustable, but they will adjust during the life of the loan. The FHA uses the One Year Constant Maturity Treasury Index; this index is the most widely used, to calculate the changes in interest rates.

The most that the interest rate on the FHA ARM would increase or decrease in any one year is 1 or 2 percentage points; depending on what type of ARM you select. The maximum interest rate change; over the life of the loan is 5 to 6 percentage points, that is from the initial rate.

The advantage of this type of loan is that you may be able to buy more house for your money; due to the payments being low in the beginning. But this loan program is good when you know you will only be in the house for a short term, or you know your income will increase, or you plan on refinancing before the loan adjusts to a higher rate.

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