In the mortgage industry there are many acronyms, and they make it difficult and intimidating for Veterans to get loans. So we’ve put a list of terms on our website that are commonly used in a VA loan transaction. But before we direct you there, we’d like to explain one term in more detail.
You’re probably aware that an ARM is not talking about a body part, but do you know about the reasons people do them and why others don’t?
An ARM is an Adjustable Rate Mortgage and is a loan type where the interest rate changes one or more times in a given period of time based on the market or the lenders costs. An ARM transfers some of the risk of lending from the lender to the borrower, and as a result, the initial rate is frequently lower than a fixed rate mortgage.
A lot of borrowers like ARMs because they allow you to get a lower initial rate and monthly payment. Other’s like them if they know they will be moving before the period for a rate adjustment happens.
The problem with ARMs is that at some point in the future your rate will likely increase. Even if you think you know that you will move within a certain period of time, unexpected events and life changing things happen, and you may get stuck with an adjusted rate that you can no longer afford.
At Creekside Mortgage, Inc we strongly encourage you to go with a VA fixed rate mortgage instead of trying to play the ARM game. In the end, Veterans and Military families will take on a lot less risk by going with a fixed rate mortgage backed by the VA.