When should I take a 3/1 adjustable rate mortgage (3/1 ARM)?
Answer:A 3/1 adjustable rate mortgage (3/1 ARM) is a mortgage that requires you a good credit standing - your FICO should be over 650 to get lenders who deal with short-term ARMs deal with you.
This particular ARM is somewhere between the 2/1 and the 5/1 ARM and is very convenient if you are looking for the medium term. The 3/1 adjustable rate mortgage (3/1 ARM) usually goes with a 2/2/6 structured cap.
That means the first adjustment after the fixed period will be at most 2% up or down; the second 2 means that you are going to have up to 2% adjustment each year afterwards, and the 6 goes for the lifetime adjustment of the loan.
With 3/1 adjustable rate mortgage (3/1 ARM) you will be expected to put around 10% down. ARMs are tricky mortgages and lenders expect you to be aware of the potential scenarios, so do your homework and research your ARM options - rates, terms and payment options that will suit you and your financial conditions best.
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