Mortgage Loan Qualifying

This article looks at the advantages and disadvantages, as well as the various types of FHA adjustable rate mortgages. An ARM home loan isn’t for everyone, but under certain circumstances there can be some advantages to a variable interest rate. Before discussing the pros and cons of an adjustable rate mortgage, it’s important to understand what an ARM home loan entails.

What is an Adjustable Rate Mortgage?

An adjustable rate mortgage or ARM is an interest rate that will fluctuate overtime With an FHA home loan, there are certain protections put into place that puts limits or caps on the ARM interest rate. With an adjustable rate mortgage, the interest rate can generally increase yearly (or several years at a time) based on the type of loan. The FHA variable interest rate also comes with a maximum cap over the life of the loan.

Advantage of an Adjustable vs. Fixed Rate Mortgage

The more common fixed rate mortgage has a constant interest rate over the life of the loan. The most common home loan is a 30-year term, although other terms are available. The main advantage of an adjustable vs. a fixed rate mortgage is an ARM will have a lower interest rate in the early stages of the loan. An adjustable rate mortgage has certain advantages for homeowners that:

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