Traditional mortgage loans are used to purchase primary and secondary (aka vacation) homes. These typically fall under the catergories of Conventional, Jumbo and Government insured and can offer rates which are either fixed or adjustable.

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The traditional fixed-rate mortgage has a constant interest rate and monthly payments that never change. A fixed-rate loan may be a good option if you plan on staying in your home for years to come.

An ARM is an Adjustable Rate Mortgage. Unlike fixed-rate mortgages that have an interest rate that remains the same for the life of the loan, the interest rate on an ARM will change periodically. The initial interest rate of an ARM is lower then that of a fixed-rate mortgage, consequently, an ARM maybe a good option to consider if you plan to own your home for only a few years; you expect an increase in future earnings; or, the prevailing interest rate for a fixed mortgage is too high.

Examples of ARM's include:

3/1, 5/1, 5/5, 7/1, 7/6, 10/1 options

The first number represents the period of time in which the rate is fixed. The second number determines the frequency of adjustment.

3/1 = fixed rate for three years then adjust annually

5/1 = fixed rate for five years then adjust annually

5/5 = fixed rate for five years then may adjust every five years.

7/6 = fixed rate for seven years then may adjust at six months intervals.


Product guidelines are determined by the the corresponding Government-Sponsored Enterprise (GSEs) such as Fannie Mae, Freddie Mac, FHA, etc. and are subject to change. Lenders and investors may have their own additional requirements/conditions called overlays. Not all programs are available in all areas. This is for informational purposes. Discuss your loan needs with a licensed mortgage professional.