Adjustable-Rate Mortgage (ARM)

An adjustable-rate mortgage offers a fixed interest rate for an initial period (typically 5, 7, or 10 years), after which the rate adjusts periodically based on a market index plus a margin. The most common ARM structures are 5/1, 7/1, and 10/1 — meaning the rate is fixed for the first 5, 7, or 10 years, then adjusts annually. ARMs include rate caps to protect against extreme rate increases. They can result in significant savings for buyers who plan to sell or refinance before the adjustment period begins.

• Initial fixed period: 5, 7, or 10 years
• Lower rate than comparable fixed mortgage
• Periodic caps limit annual rate change
• Lifetime cap protects against extreme increases
• Can save thousands during fixed period
• Eligible for most property types

• Credit score 620+
• Standard income and employment verification
• Property appraisal required
• Must qualify at note rate (some programs at fully indexed rate)
• Debt-to-income ≤45%