March 8, 2012
Did you know the FHA loan program gives borrowers the option of choosing an adjustable rate mortgage, also known as an FHA ARM loan? Adjustable rate mortgage loans offer an introductory interest rate which, according to the terms of the individual loan, change after the introductory fixed rate period.
How long the introductory period may last can vary depending on the loan. Once the introductory rate period has elapsed, the adjustable rate is subject to a cap which can apply year-to-year, or over the lifetime of the FHA loan. The introductory interest rate is often lower than the fixed rate of conventional home loans, making ARM loans attractive to some borrowers depending on their financial needs and goals.
ARM loans are comprised of four basic components; the index, margin, interest rate cap and the initial interest rate. As mentioned above, the ARM loan features an introductory interest rate. At the end of that introductory period, the rate expires, a new interest rate is obtained by adding the margin
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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