The Adjustable Rate Mortgage, also called an ARM, has the primary advantage of having a low payment for the first 6 or 12 months. The interest rate and payment is typically fixed for this introductory period of time, after which point the rate changes and the payments adjusts. This allows for the borrower to make six or twelve monthly payments on time, which helps to improve their credit score and qualify for a better rate and payment. Many borrowers use this product to improve their credit score and then to refinance at a lower rate and payment. The disadvantage is “payment shock” when the new payment is calculated after the introductory period and the borrower has to make higher payments.

   The introductory period interest rate is typically fixed - this is important as it indicates there is no “negative amortization” (when your outstanding balance increases instead of decreases). The new payment that is calculated after the introductory period is based upon the Index and the Margin. The index is an external, independent “cost of money” and the margin is the amount in addition to the index that together equals the adjusted interest rate.

   It is important to understand the index being used in the loan. For this credit profile, the most common is the LIBOR (London Interbank Offered Rate) which is an international market-based index of the cost of money that trades continuously like the stock market. A history of the index’s performance should be reviewed as part of the application process. The ARM rate has an important feature of “caps”. The increase in the rate is capped in how much it may increase in any particular adjustment period (that typically occur every six to twelve months). These periodic increases are also “capped” in how much it may increase over the life of the loan.

• Adjustable Rate Mortgage (ARM) (open document)
• Fixed Rate for 2 or 3 Years
• 30 Year Fixed Rate
• 15 Year Fixed Rate
• Hard Money Loans

Detailed Information (Credit Categories)

General Loan Program Descriptions

• Cash Out Home Loan 
• Bill Consolidation 
• Financing Options for Self-Employed 
• Home Purchase Loan Financing 
• Bad or Less than Perfect Credit 
• Mortgage Refinance