5-year adjustable-rate mortgage benefits & guidelines
A five-year adjustable-rate mortgage (ARM) offers stability for the first five years, as this loan functions like a fixed-rate mortgage with payments that don’t change. After that, the interest rate adjusts based on a set formula, and often your monthly payments will change and could even go down.
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Why choose a 5-year ARM?
A five-year ARM could offer significant savings during its initial fixed-rate period and is ideal for buyers who plan to sell or refinance before the adjustable-rate period begins.
To qualify for a 5-year adjustable-rate mortgage, you will need:
- Credit score verification
- Income verification
Cash on hand for a down payment
Since five-year ARM rates could make the initial period of homeownership more affordable, this type of loan can unlock more housing options for you. While the adjustable period comes with some level of unpredictability, understanding when and how adjustments are calculated can help you decide if this loan fits your goals.
Homebuyers have two main options: the traditional 5/1 ARM and the newer 5/6 ARM.
- 5/6 ARM - The 5/6 ARM format reflects changes from the adoption of a newer market-sensitive index and recalculates rates every six months.
- 5/1 ARM - Traditionally, the 5/1 ARM has been the most common type, featuring a fixed rate for the first five years and annual adjustments thereafter.
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How to apply for a 5-year adjustable-rate mortgage
Applying for a five-year adjustable-rate mortgage is simple with Rate’s Digital Mortgage. Follow these steps.
1. Review your finances
Check your credit score, income, DTI ratio and cash on hand for a down payment.
1. Review your finances
Check your credit score, income, DTI ratio and cash on hand for a down payment.
2. Gather key documents
In most cases, you’ll need to provide income verification, tax returns, asset statements and personal identification.
3. Apply online
Once you submit your application, your Loan Officer will help you from there.
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Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply.
Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate, Inc.
Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.
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*Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Rate for current rates. Restrictions apply.