Question 1

How often does the rate adjust on a portfolio ARM?

Accepted Answer

Most adjust annually after an initial fixed period of 3, 5, or 7 years. A few lenders offer 6-month adjustment periods but those carry higher caps and less favorable terms.

Question 2

Can I refinance a portfolio ARM into a conventional loan later?

Accepted Answer

Yes, if your credit improves and the property appraises cleanly. Many borrowers use portfolio ARMs as bridge financing then refinance once they've established payment history.

Question 3

Do portfolio lenders require reserves for Nevada City fire risk?

Accepted Answer

Most want 9 to 12 months of reserves for properties in high fire severity zones. That's double the typical requirement but reflects actual risk in the foothills.

Question 4

What happens if I can't afford the rate after it adjusts?

Accepted Answer

You need to refinance or sell before the adjustment hits. Portfolio ARMs aren't long-term holds unless you're confident rates will stay stable or drop.

Question 5

Will portfolio lenders approve homes with legal issues?

Accepted Answer

Some will if you have a clear path to resolution and strong reserves. Unpermitted additions or boundary disputes kill most deals, but portfolio lenders have more wiggle room than agencies.

Portfolio ARMs in Nevada City: Flexible Financing for Unique Properties