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Courses in this Department

How Ready Are You to Buy a Home?

Determining Your Dream Home and Finding It!

Factory Built Homes Are Worth a Look

Purchase Manufactured Homes with FHA Loan

How to Buy a Foreclosed Home

Pros and Cons of Corner Lots

Know the Neighborhood Before You Buy

Tune in to an Open House on the Radio

Finding a Qualified Broker or Agent

Shopping for a Loan and Choosing a Lender

How to Improve Your Credit

How to Survive the Loan Application Process

Making an Offer and Signing Contracts

Cancel Your Contract in 3 Days

Understanding the Closing/Settlement Process

Choosing Home Inspection and Settlement Professionals

Double Check Your New Home - The Walkthrough

Know Your Consumer Rights

Seniors Have Many Housing Opportunities

Preparing for the Big Day -- Relocating Moving

Make Your Home Your Castle - Cost Effective Redecorating Ideas


Adjustable Rate Mortgages (ARMs)

The changing loan.

Basic Features

They can affect your loan costs and future loan payments.

  • Index

    The ARM interest rate you pay is tied to a national index. The two most common are the T-Bill Indexes: six-month, three-year or five-year treasury bonds, and the Cost of Funds Indexes (COFI). COFI loans are less volatile over time than loans based on T-Bills. A COFI loan is a safer loan, especially if rates are increasing. If you think rates will definitely go down, then you might consider a T-Bill loan.

  • Initial Interest Rate

    Also called a "teaser rate," it lasts only until your first adjustment. Your lender may use this lower initial rate to determine how large a loan you qualify for.

  • Margin

    Lenders add a few percentage points to the index rate, called the "margin." Your actual interest rate is the sum of the index rate plus the margin. The amount of the margin can differ from one lender to another, but it is usually constant over the life of the loan. In comparing ARMs, be sure to add the index and margin.

  • Adjustment Period

    The interest rate and monthly payment will adjust periodically according to a fixed schedule. One-year ARMS adjust every year, while others change every three years, or five years.

    Example: On a 3/1 ARM, the initial rate lasts for 3 years and the interest rate adjusts annually.

Take a Look at Some Optional Features...

The adjustable rate loans have some other features you may like.

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