7/1 ARM Mortgage Loan

The 7/1 ARM combines features of adjustable rates and fixed-rate mortgages, offering a fixed interest rate for the first seven years before adjusting annually. To better understand how this ARM can fit into your homeownership plans, you can start by speaking to one of our seasoned experts.

Here's an example of how a 7/1 ARM works:

• If you close the loan on April 1, 2024, the interest rate remains constant until March 31, 2031.
• From April 1, 2031, the rates start to adjust annually.
• The new rate is typically based on an index (like SOFR) plus a margin.
• Your loan agreement will specify maximum and minimum rates, as well as adjustment caps.

To qualify for a 7/1 ARM, you typically need:

• A credit score of 620 or higher
• A debt-to-income ratio of 43% or less
• The ability to make a 3% down payment

Lenders will also assess your income, employment history, and other financial records.

Interest rates for 7/1 ARMs change constantly. At Total Mortgage, we update our 7-year ARM rates twice daily so you can take advantage of the lowest interest rates at the right time. Check our website or speak with a loan officer for the most current rates.

Understanding the advantages and disadvantages of a 7/1 ARM can help you make an informed decision.

• Lower initial monthly payments due to lower starting interest rates
• Potential for even lower payments if rates decrease during the adjustment period
• Seven years of predictable payments before any adjustments occur

• Potential for higher payments if rates rise during the adjustment period
• Complex loan structure with various components like rate caps, margins, and indexes
• Risk of becoming an interest-only trap if not managed properly

A 7/1 ARM might be a good choice if:

• You don't plan to stay in the home for more than 7 years
• You expect interest rates to fall in the coming years
• You anticipate your earnings to increase after seven years
• You're comfortable with some uncertainty in exchange for initial savings