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Ready to start your home buying journey? Apply now and get pre-approved for your mortgage.
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Know the rates, know your options. Start building your homeownership plan today.
Monthly Mortgage Calculator
Get a clear picture of your monthly mortgage payment using your rate, credit score, and down payment information.
Affordability Calculator
Not sure what fits your budget? This calculator factors in your income, debts, and down payment to help you find the right price range.
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Ready to lower your rate or tap into your equity? Apply now and start your refinance journey with confidence.
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Refinance Mortgage Calculator
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Cash-Out Refinance Calculator
See how much equity you can tap into. Estimate your new mortgage payment and compare loan options.
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About
FHA 5/1 ARM
<p class="MsoNormal">This loan comes with less stringent requirements and an extra low interest rate for the first 5 years</p>
Benefits
Lower Initial Rate
The initial rate of a 5/1 ARM is typically lower than any fixed-rate loan.
Rate Caps
Rate caps protect buyers from sudden and dramatic changes in interest rates and monthly payments.
Flexibility
Borrowers have five years to either sell their home or refinance the mortgage before rates adjust.
Lenient Credit Requirements
The credit score requirements are more borrower-friendly than those of conventional loans.
FHA 5/1 ARM Loan Information
<p>The FHA 5/1 ARM is an Adjustable-Rate Mortgage backed by the Federal Housing Administration. It offers a fixed interest rate for the first five years, after which the rate adjusts annually. To better understand how this loan can fit into your homeownership plans, you can start by <a href="/apply">speaking to one of our seasoned experts</a>.</p>
How FHA 5/1 ARM Loans Work
<ul><li>Interest rates depend on the Secured Overnight Financing Rate (SOFR) index</li><li>Lender adds a margin to compute new rates after the fixed-rate period</li><li>Rate adjustments have annual and lifetime caps</li><li>Interest rate can increase by 1% annually and 5% over the life of the loan, or 2% annually and 6% over the life of the loan</li></ul>
FHA 5/1 ARM Loan Requirements
<ul><li>Occupancy: Only applicable to primary residences</li><li>Borrowing Limits (2024): $498,257 for one-unit properties, up to $1,149,825 in high-cost areas</li><li>Credit Score: Minimum 500 (higher down payment) or 580 (lower down payment)</li><li>Down Payment: 3.5% for credit scores 580+, 10% for scores 500-579</li><li>DTI: Generally 43%, some lenders may allow up to 50%</li><li>Employment Verification: Steady employment for the last two years</li><li>Mortgage Insurance: 1.75% of total loan amount at closing</li></ul>
Ideal Situations for FHA 5/1 ARM
<ul><li>Refinancing: Lower initial rate for 5 years before potentially converting to a fixed-rate mortgage</li><li>Short-Term Homeowners: Those planning to sell before the fixed-rate period ends</li><li>Financial Growth Expectations: Borrowers anticipating higher income within five years</li></ul>
Pros and Cons of FHA 5/1 ARM Loans
<p>Understanding the advantages and disadvantages of an FHA 5/1 ARM loan can help you make an informed decision.</p>
Additional Pros
<ul><li>Lower initial interest rate compared to fixed-rate loans</li><li>Rate caps protect against dramatic payment increases</li><li>Flexibility to sell or refinance before rate adjustments</li><li>More lenient credit requirements than conventional loans</li></ul>
Cons to Consider
<ul><li>Potential rate increases after the initial fixed period</li><li>Complex loan structure with various components</li><li>Risk of unaffordable payments if rates rise significantly</li><li>Limited to primary residences only</li><li>Requires mortgage insurance premiums</li></ul>