Adjustable rate mortgages (ARMs) have received some negative attention in recent years as many people found themselves unemployed or without enough equity left in their homes in order to refinance.  However, in the right scenarios, an adjustable rate mortgage offers rewards in terms of potential lower short term interest rates.
An adjustable rate mortgage is a loan that has a fixed introductory interest rate for a relatively short period of time - typically from 2 to 10 years depending upon the product - after which time, the mortgage adjusts up or down based on the loan's margin, caps, and the index which the loan is tied to.  Generally, the fixed interest rate for the defined period of time is lower than traditional 15 to 40 year fixed rate mortgage products.
There are risks and rewards when it comes to considering a 5 year adjustable rate mortgage (ARM).  The advantage is that you can save money by locking in a lower interest rate for the first five years.  Rates tend to be lower the shorter the introductory period of an ARM, so a 5 year ARM would have a lower interest rate than a 7 year ARM.  Plus, it may be possible to make additional principal reduction payments monthly or quarterly to try and shorten the life of the loan.  Saving money with an ARM by having a lower interest rate for the fixed introductory time period may enable you to make those additional payments.
The risk of having an adjustable rate mortgage comes with the indeterminate nature of the interest rate after that fixed period.  If you had an ARM in the early 2000's, you may have found yourself with an even lower interest rate once the ARM adjusted.  However, if you had an adjustable rate mortgage in 2009 when many housing markets collapsed, you may have found yourself upside down in your mortgage without the ability to refinance out of the adjustable rate product. This could spell serious trouble for you if the indexes which the loans are tied to begin to increase.
One instance where a 5 year adjustable rate mortgage may make sense is if you know you likely won't be in your home for longer than five years.  Then you may wager that you'll close out your loan before it can adjust to a potentially higher rate.
When considering the advantages of a 5 year ARM, it's important to think about the length of time you may live in your home, your current and projected future income, your ability to pay a higher monthly mortgage payment if the 5 year ARM adjusts to a higher rate before you close it out, and the savings you can achieve while paying lower interest rates during the fixed period.
It is strongly recommended that you consult with a mortgage and tax professional when weighing the risks, rewards, and advantages of a 5 year ARM.  While an ARM can help save money in the short term, it's important to have a long term plan when choosing an adjustable rate mortgage.  A licensed mortgage loan officer can help you understand the implications of choosing a 5 year ARM.

by; Nat Criss

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When you go to a lender which is usually the bank; (there are intermediary companies called lenders, but they don't give the money for the loan they are in between you and the bank) for a home loan there are a few that may fit your situation. It is the lenders job to find the loan (in this case the mortgage) that best suits your situation.

The three loans that are primarily available for loans for mortgages are:
1.   A Conventional Loan
2.   A FHA Loan
3.   VA Loan

A "Conventional Loan" is a regular mortgage loan. This is a go to the bank and take out a loan mortgage. FHA Loans are government loans that make it easier for people to buy a home. The thing about FHA loans is the government guarantees part of the loan. If a person has problems making their mortgage payments then the government will pay it back for you. This is providing you are in default (the bank is in the process of taking your home because you can't meet the mortgage payments). Since FHA loans are guaranteed they are easier to pay back. Keep in mind that the government will only step in and pay after your house is repossessed. Not all home sellers will agree to take this type of loan. This is because they feel there is too much red tape involved. If you qualify for a FHA loan the house cannot be a fixer upper. An FHA home has to pass the home inspection with flying colors. However there are several FHA programs for those who qualify.

VA loans are for Veterans; those who have served in the armed forces of the United States. The good thing about VA home loans is that you may have the down payment waved. With a VA loan the government guarantees the loan like an FHA loan to make the lender feel comfortable with lending the person asking the money. A VA loan can be combined with a second mortgage. In that case the bank makes the primary loan for the price of the home and the seller makes a separate loan for the buyer so they can cover the rest of the costs involved. The best thing about a VA loan is that it can be qualified so that if a future buyer is interested in your home your hands are not tied if you have to sell it.  You can also sell the home to anyone you choose. They do not have to be a veteran.

By;Nash Dadameah

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