FHA Adjustable rate mortgage
FHA ARM OR FHA ADJUSTABLE RATE MORTGAGE
Adjustable rate mortgages (ARM) or variable rate mortgages as they are called most frequently outside of the United States are loans that are not fixed in their interest rate, and not fixed in the monthly payment after a given introductory period. The interest rate after the introductory period is adjusted based upon an index which is reflective of the cost to the lender of borrowing on the credit markets. There are published indexes, and these loans are effectively tied to them. Many times the introductory period will be 3, 5, or 7 years after which the payment is likely to go up or down and will not remain the same.
FHA (ARM) adjustable rate mortgages, unlike conventional (ARM) adjustable rate mortgage are designed more to protect the home owner from interest and subsequent payment increases. There are ceilings for growth in interest rate on an annual and lifetime basis that are much more attractive than conventional ARM products. There is value in managing the amount that your mortgage can rise in any given period.
The initial interest rate will be lower than that of a fixed rate mortgage, allowing for a lower payment. Low payment, lower interest rates, low down payment requirements, and low credit score requirements make the FHA (ARM) adjustable rate mortgage a super option.