PURCHASES

Are you in the market for a new home but aren't sure what type of mortgage loan to choose? Have you considered an Adjustable-Rate Mortgage (ARM)? Lisa Smith strongly recommends this type of loan to those who are looking to maximize their buying power in today's market.

An ARM is a mortgage loan that features an interest rate that may change periodically based on several factors. These types of loans offer a lower initial interest rate than a fixed-rate mortgage which can lead to lower monthly payments, and therefore more buying power.

These loans are ideal for individuals who plan to live in their homes for a short period of time as the initial lower interest rate is fixed for a set period. To qualify for an ARM, you generally need the following:

1. Have a minimum 3% - 5% down payment
2. A minimum qualifying FICO® Score of 580 - 620, and a debt-to-income ratio (DTI) of no more than 50%.
3. It may also require that you have an established credit history and/or a FICO Score of 660+ and a down payment of at least 10%.

The lower initial interest rate can lead to lower monthly payments, which is ideal for those who are looking to save money on their monthly expenses. Additionally, an ARM can be a great option for those who are not planning to stay in their home for the long-term. This means they can take advantage of the initial lower interest rate for the period in the home.

Adjustable-rate loans typically have a rate adjustment cap that limits how much the interest rate can adjust in any given year, helping to avoid any unexpected surprises.

Your interest rate change will depend on the specific terms of your loan. Some loans may adjust just once per year, while others may adjust as often as once per month. The most common adjustment period is typically every six months.

Lisa Smith can help find the perfect ARM for you and your specific needs.