All about ARM's, Adjustable Rate Mortgages.

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With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. But with
an ARM, the interest rate changes periodically, usually in relation to an index of some type, and
payments may go up or down accordingly.

Lenders generally charge lower initial interest rates for ARMs than for fixed-rate mortgages. This
makes the ARM easier on your budget at first, than a fixed-rate mortgage. It also means you might
qualify for a larger loan, because lenders sometimes make the decision about whether to extend
a loan on the basis of your current income and the first year's payments. Moreover, your ARM could
be less expensive over a long period than a fixed rate mortgage... for example, if interest rates
remain steady or move lower.

Against these advantages, you have to weigh the risk that an increase in interest rates might lead to
higher monthly payments in the future. It's a trade-off... you get a lower rate with an ARM in exchange
for assuming more risk. However, for the past 25-years an ARM has been a safe bet.

-- Is my income likely to rise enough to cover higher mortgage payments if
interest rates go up?

-- Will I be taking on other sizeable debts, such as a car loan or school
tuition, in the near future?

-- How long do I plan to own this home? (If you plan to sell soon, or not
long after you buy, a rise in interest rates may not be the factor it could be
if you plan to own the house for a long time.)

-- Can my payments increase even if interest rates generally do not
increase?

With most ARMs, the interest rate and monthly payment change every year,
every two years, every three years, or every five years. However, some ARMs
have more frequent rate and payment changes. The period between one
rate change and the next is called the "adjustment period". A loan with an
adjustment period of one year is called a one-year ARM, and the interest
rate can change once every year.

Most lenders tie ARM interest-rate changes to changes in an "index rate."
These indexes, and there are several types of indexes, usually go up or down
with the general movement of interest rates. If the index rate goes up, so
does your mortgage rate and payment in most circumstances. On the other
hand, if the index rate goes down, your monthly payment may go down.

Lenders base ARM rates on a variety of indexes. Among the most common
indexes are the rates on one-, two-, three-, or five-year Treasury securities.
Another common index is the national or regional cost of funds to savings
banks. A few lenders use their own cost of funds as an index, which gives
them more control than using other indexes. Another common index is the
LIBOR rate.

To determine the interest rate on an ARM, lenders add to the index rate a few
percentage points called the "margin." The amount of the margin may differ
from one lender or investor to another, but it is usually constant over the life of
the loan.

Yes, this would have to be ARM. But, you should understand that ads like these play up
low, initial rates that are NOT available to everybody. You would have to be a very well-
qualified borrower to obtain this offering. That is, you would need to have perfect
credit, and be borrowing funds under optimum conditions as defined by the lender.
The truth is, most people will not fit the guidelines of qualifying for this loan. It's just
"sales hype" designed to get your attention... and hopefully, your business at what will
be a higher rate and monthly payment. It's not exactly a "bait and switch" tactic, but it's
close to it.

There are never, really accurate interest rates which can be quoted as "hard and
fast" for an ARM... or any type of ARM loan, until you as the borrower, answer some
questions first. Those places which publish current or daily interest rates are
displaying national averages. And these averages, usually tend to be the rates
which would be extended only to the best qualified borrowers. If you have any flaws
or imperfections in your credit or total borrowing profile, you will not qualify for these
published, average rates. The rate offered to the average borrower needs to be
determined by reviewing that borrower's credit and complete borrowing profile.

Yes, in fact, the vast majority of interest only option loans available are comprised
of ARM loans. The most popular and sought after mortgage loan today is probably
the zero down, interest only purchase loan which consists of an 80/20 combo
loan. The "80" or 80% portion of this 100% loan is usually an ARM, and it usually
is offered with an interest only option.

There's no simple answer to this question, and to respond to it properly, it would
be necessary to know, among other things, if the 550 FICO is just one of your
scores... or your "midscore". Mortgage lenders always pull a tri-merged credit
report from all 3 major credit bureaus. The industry standard is NOT to use your
highest or lowest score to qualify you, but the score that is the middle number...
or your midscore.

Another thing to know is, if you're asking about a purchase loan, do you have any
money or cash for a down payment? If the answer is no, and you're looking for a
zero down loan or 100% financing, then you would NOT be able to obtain an ARM
loan with this score... whether it's your midscore, or even your high score. The
amount of your down payment, if any, is a big factor in what interest rate you're
offered.

To be safe, you should have at least a 580 minimum, midscore FICO to obtain a zero
down, interest only ARM loan. And, that's NOT just true here at Mortgage Match...

the 580 minimum is an industry-wide requirement. There are some exceptions, but if
your FICO is below 580, and higher than 560, you should go through the preapproval
process to see if a zero down, interest only loan is a possibility.