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When it comes to buying a home, many of us want to get the biggest home that our income allows. Getting low mortgage rates on the home loan is one option, or increasing the down payment or the amount of borrower income. Due to the fact that a willful increase in job income or down payment is out of reach for many, the only option remaining is a lower mortgage rate. A lower interest rate can be achieved in the early years of the mortgage if the borrower chooses and adjustable rate mortgage (ARM). By using a 1, 3, 5, 7 or 10 year ARM loan, a borrower can take advantage of rates lower than those offered for prevailing 30 year fixed rate loan programs. After the introductory period is over, the rate on the mortgage will adjust annually, based on prevailing interest rate levels.

The monthly payment on these loans can rise upon completion of the introductory period, so do some analysis on potential increases. Assuming a 2% increase in interest rates, determine what a potential mortgage payment would be using a mortgage payment calculator (typically found on the Internet). If the monthly payment becomes too uncomfortable after the 2% rise, an ARM loan is probably not a viable option at this time. Many homeowners with ARM loans were faced with loan payments they could not afford after a rate adjustment, forcing them to seek mortgage loan modification arrangements with their lenders. If you need assistance weighing the benefits and risks of adjustable rate mortgage loans, consult with a licensed mortgage professional.