How To Get an Adjustable Rate Mortgage

If you can qualify for a mortgage, you can qualify for an adjustable rate mortgage.  Almost every lender that offers one will offer the other as well.  If you qualify, the hard part isn’t getting the adjustable rate mortgage; it’s deciding that’s what you really want.  

With a fixed rate mortgage, your interest rate doesn’t change from year to year.  That means your mortgage payment will usually stay about the same over the entire life of the loan. There may be small fluctuations if you are paying insurance and property taxes as they will change over the life of the loan.  But the bulk of the payment – the principle and interest – will remain the same. 

With an adjustable rate mortgage, you often have a “fixed” rate for a period of time.  After that, the interest rate can change.  Many loans have the change limited to once a year, and some have a cap.  In other words, your rate can’t change by more than one percent at a time.  This helps to keep the payment from rising to quickly.  But it can and probably will rise.  

Way back when, there used to be a sizeable difference between the rates offered for fixed loans and the rates offered for adjustable rate loans.  When you first got your loan, the payments were considerably lower for the adjustable rate loans.  In the current markets, there’s not much difference in rates.  That gap widens and narrows regularly.  Whether or not the adjustable rate is a good idea depends on so many factors that it’s impossible to say.  Factors like: how long you plan on living in the home, how soon you refinance, whether interest rates go up or down, the specific terms of the loan, all have an affect.  Make sure you do your homework and choose the mortgage that fits your financial goals. 

But now that you’ve chosen the mortgage, how to you get one?  If you have already worked with a lender, ask about their adjustable rate products.  There is usually more than one.  The terms vary, so check them out carefully and choose the right one for you.   

If you don’t already have a lender, you can find one either locally or on the internet.    Regardless of the lender you chose, you will have to provide a fair amount of documentation.  For example: pay stubs, social security numbers, driver’s license information, and tax returns are all usually requested.  They will also pull your credit report.  All of this information is pretty standard regardless of race or economic status.  The lenders want to see that you have a way to pay back the loan and that you are a good credit risk.   

It will generally take between 30 – 60 days to close your new mortgage.  During that time, it is best not to open or inquire about any new credit lines.  Mortgage companies often pull another credit report just before closing.  You don’t want to jeopardize your new loan so wait until after closing to open any new credit cards.   

You should be given a closing date.  You and any cosigners will meet with the lender on that date and sign all the paperwork.  You will probably feel like you are signing your life away.  But once that last document is signed, you will be the proud owner of a new adjustable rate mortgage. 


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