Question 1

What does the 7/1 in a 7/1 ARM mean?

Accepted Answer

The rate is fixed for 7 years, then adjusts annually. Most San Jose buyers sell or refi before year 7 anyway.

Question 2

How much can my ARM rate increase after the fixed period?

Accepted Answer

That depends on your cap structure. A 5/2/5 cap limits jumps to 5% at first adjustment, 2% per year after.

Question 3

Are ARMs riskier than fixed loans in San Jose?

Accepted Answer

They carry rate risk after the fixed period. Buyers with shorter time horizons or refi plans manage that risk well.

Question 4

Do jumbo ARMs require a larger down payment?

Accepted Answer

Typically yes — most jumbo ARM lenders want 20% down. Some portfolio lenders go lower with strong reserves.

Question 5

What index do ARM rates adjust to?

Accepted Answer

Most tie to SOFR, the benchmark that replaced LIBOR. Your margin plus SOFR equals your adjusted rate.

Question 6

Can I refinance out of an ARM before it adjusts?

Accepted Answer

Yes, and many San Jose borrowers do exactly that. Watch prepayment penalty terms before you commit.

ARM Loans in San Jose: Lower Rates, Smarter Moves