Adjustable Rate Mortgage
An adjustable rate mortgage (ARM) allows you to get into a home with an introductory rate that is initially lower than the current fixed rate offering.
When you need a lower rate than what the market is offering.
When interest rates are climbing beyond the range that a borrower wants to commit long-term, an adjustable-rate mortgage (ARM) could be the solution. Borrowers can sometimes get lower rates than what is offered for fixed-rate mortgages for an introductory period of the ARM, depending on factors such as credit score and income.
Adjustable-Rate Mortgage Requirements:
- Minimum 680 credit score
- Debt-to-income (DTI) ratio cannot exceed 45% (monthly payment will be calculated using the higher of the introductory rate or the fully indexed rate)
- Requires at least 5% down payment for conforming loans
- Can get a loan amount up to the conforming loan limit, currently $726,200 for 2023 (in most areas)
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Minimum loan amount of $175,000 required to apply*
Adjustable Rate Mortgage FAQs
What is an adjustable-rate mortgage?
An adjustable-rate mortgage (ARM) is a type of home loan with an interest rate that changes periodically, based on the market. The introductory period (typically 3, 5, 7, or 10 years) can have an interest rate that is initially lower than the current fixed rate offering. After the introductory period, the rate is variable based on current market conditions.
What are the advantages of an adjustable-rate mortgage?
Adjustable-rate mortgage advantages include:
- Typically get an introductory rate lower than the current fixed rate offering
- Good option if you plan on moving soon (before the introductory period is over)
- May be eligible to refinance into a fixed-rate loan when interest rates drop
How does an adjustable-rate mortgage work?
The borrower works with the lender to determine the introductory period that makes the most sense for them (3, 5, 7, or 10 years). For example, a 3/1 ARM has an introductory rate for the first three years, then will adjust up or down annually based on current market conditions. ARMs can also have caps on how much the rate can go up and floors on how much the rate can go down at each adjustment period.
What are the requirements of an adjustable-rate mortgage?
Some of the requirements to qualify for an adjustable-rate mortgage include:
- Minimum 620 credit score
- Debt-to-income ratio (DTI) cannot exceed 45% (monthly payment will be calculated using the higher of the introductory rate or the fully indexed rate)
- Requires at least 5% down payment for conforming loans
- Can get a loan amount up to the conforming loan limit, currently $726,200 for 2023 (in most areas)
Can I refinance from an adjustable-rate mortgage to a fixed-rate loan?
If market rates drop to a point you are comfortable with, you may be able to refinance to a fixed-rate mortgage and lock in that rate. Just make sure you do the math and determine that you will save money, after factoring in closing costs and loan term.
What is the minimum required loan amount?
A minimum loan amount of $175,000 is required to apply. Exceptions include mortgage products for properties located within the Greater Kansas City metro and surrounding areas. Contact a NASB Loan Officer for details on the excluded areas and/or zip codes.
Adjustable Rate Mortgage Calculators
What Our Customers Say
Tallaresha C., October 21, 2022
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"Because I noticed that you guys were on top of your game, I decided to go with NASB rather than some of the other lenders with whom I actually have banking relationships and who also provide me with lower interest rates. You guys didn't waste any time and had excellent communication. The fact that I was given the "clear to close" earlier than my original closing date was quite impressive to me, too. I look forward to doing business with NASB again very soon!"
"Because I noticed that you guys were on top of your game, I decided to go with NASB rather than some of the other lenders with whom I actually have banking relationships and who also provide me with lower interest rates. You guys didn't waste any time and had excellent communication. The fact that I was given the "clear to close" earlier than my original closing date was quite impressive to me, too. I look forward to doing business with NASB again very soon!"
