Question 1

What does 5/1 ARM mean for a Redwood City purchase?

Accepted Answer

Your rate stays fixed for five years, then adjusts annually based on current market rates. Most buyers refinance or sell before the first adjustment.

Question 2

Can I refinance an ARM before it adjusts?

Accepted Answer

Yes, but refinancing costs 2-3% of your loan amount in closing costs. Plan this expense before your first adjustment date.

Question 3

Do ARMs make sense for San Mateo County jumbo loans?

Accepted Answer

ARMs save the most on jumbo loans because the rate spread versus fixed is widest. Rates vary by borrower profile and market conditions.

Question 4

What happens if rates rise before my ARM adjusts?

Accepted Answer

Rate caps limit how much your payment can increase. A 2/2/5 cap means 2% max at first adjustment, regardless of market rates.

Question 5

How do lenders qualify ARM borrowers in Redwood City?

Accepted Answer

Lenders use the fully-indexed rate, not your start rate. You must prove income to handle payments after the first adjustment.

Question 6

Should I choose a 5/1 or 7/1 ARM?

Accepted Answer

If you're certain you'll move in five years, take the 5/1 for maximum savings. Otherwise, the 7/1 offers better protection against timing uncertainty.

Adjustable Rate Mortgages in Redwood City — Lower Start Rates for Peninsula Buyers