Adjustable Rate Mortgages (ARMs) & 100% Financing

In the realm of mortgage lending, portfolio products offer an array of options to cater to unique borrower circumstances. Let’s look at two of the most popular products: Adjustable Rate Mortgages (ARMs) and 100% financing options.

Understanding ARMs

ARMs are loans with interest rates that can change over time. The numbers in the ARM (for instance, 10/1 or 5/1) represent the adjustment periods. In a 10/1 ARM, the interest rate is fixed for the first 10 years and can then adjust annually. In a 5/1 ARM, the rate is fixed for five years before it can adjust annually.

Benefits of ARMs

  • Lower Initial Interest Rates: ARMs often start with lower interest rates than fixed-rate mortgages, which can lead to lower initial monthly payments.
  • Potential Rate Drops: If market interest rates decrease, your ARM interest rate might also drop during the adjustment period.

Understanding 100% Financing Options

100% financing options, as the name suggests, allow borrowers to finance the entire purchase price of a home, eliminating the need for a down payment.

Benefits of 100% Financing

  • No Down Payment Required: These loans are ideal for those who haven’t saved a significant amount for a down payment.
  • Possible Lower Rates: Depending on the program, some 100% financing options may offer competitive rates.

Considerations with 100% Financing

  • Higher Loan Amounts: Since you’re financing the entire purchase, your loan amount – and therefore your monthly payment – may be higher.
  • Potential for Negative Equity: If home values decline, you could end up owing more than the home is worth.

We Can Help

Whether you’re considering an ARM or 100% financing, your Meridian Mortgage Loan Officer is here to help you understand your options and guide you through the process.

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Questions? Give us a call.