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How To Apply For An Adjustable Rate Mortgage

How to apply for an FHA Adjustable Rate Mortgage

Do you know how to apply for an FHA adjustable rate mortgage loan (ARM)? The loan limits are the same on FHA ARMs as they are for fixed-rate mortgages, but your strategy for the loan should be quite different.

It’s important to apply for an adjustable rate loan with a purpose; if you aren’t sure why a fixed rate loan is better for some than an ARM, you aren’t ready for an ARM loan application yet.

The government’s Consumer Financial Protection Bureau has published some sound advice for house hunters interested in an adjustable rate mortgage; that advice includes knowing when you would want an ARM loan and when you would not want one.

The basic difference between a fixed rate FHA mortgage and an adjustable rate is that with adjustable rate mortgage, the interest rate will be adjusted over the course of the mortgage. These adjustments, for FHA mortgages, are regulated and will occur over a fixed period with caps on the adjustments.

ARM loans may include a lower introductory rate than its fixed-rate equivalent. After that introductory period your interest rate will be adjusted.

How To Apply For An FHA Adjustable Rate Mortgage

Have a plan to deal with your mortgage once the interest rates start getting adjusted; don’t ignore these adjustment periods and simply hope they don’t go too high.

You should either be preparing to adjust your monthly budget to accommodate the higher mortgage payment, or be getting ready to sell or refinance the home to get out of the adjustable rate situation at some stage.

Borrowers who choose adjustable rate mortgages often do so because they know they are not planning to stay in the home for the full term of the mortgage. They plan to take advantage of the lower interest rates in the earliest days of the loan before refinancing or selling. That is what we mean when discussing why it’s important to have a strategy for your ARM loan.

Whatever strategy you decide works best, and it truly is the borrower’s decision at the end of the day, you should consider the following advice before choosing an ARM loan or an FHA fixed-rate mortgage:

  • Learn how the high the interest rates can go with an ARM loan, both per adjustment and over the lifetime of the mortgage;
  • Ask the lender how often your ARM loan interest rates are scheduled to adjust;
  • Ask soon after the loan closes to expect the very first interest rate change;
  • Ask about interest rate caps on the ARM loan, and how much the adjustments will cost you over the lifetime of the mortgage;
  • Don’t assume you will be able to sell or refinance your home within a short span of time if you need to beat the deadline for the first or next interest rate adjustment. Have a plan on how to handle your finances if you can’t refinance or sell the home before your ARM loan interest rate adjusts again.
Joe Wallace - Staff Writer

By Joe Wallace

September 19, 2019

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 for (8) years and is currently the Associate Editor for

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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