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An adjustable rate mortgage loan (often referred to as an ARM loan) is a mortgage loan with an interest rate that remains fixed for a predetermined period of time and then adjusts once each year for the remaining life of the loan. They allow borrowers to pay lower interest rates on the loan for the predetermined period of time. The initial rate may stay the same for months, one year, or a few years. After that time, the rate will change, and the monthly payments associated with the loan will also change. Usually, it is almost certain that the rate will rise at some point in the future.
ARM loans are typically easier to qualify for than other kinds of loans. That is due in part to the fact that the lower starting interest rate can keep you under the debt-to-income ratio limit set by the lender. Who qualifies for an ARM loan depends on a variety of factors, including their income, the loan terms, and the lender, among others. However, because it is usually easier to qualify for an ARM loan and offer lower beginning interest rates, it is always worth looking into when you are looking for a home and have found that interest rates are relatively high.
Some of the benefits that come from getting an ARM loan include:
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