Question 1

How often does the rate adjust on a portfolio ARM?

Accepted Answer

After the initial fixed period, most adjust annually. A 5/1 ARM stays fixed for five years, then adjusts once per year. Some lenders offer 5/6 ARMs that adjust every six months.

Question 2

Can I qualify with seasonal farm income?

Accepted Answer

Yes, portfolio ARM lenders evaluate seasonal income case-by-case. Expect to show multiple years of bank statements or tax returns proving consistent annual totals despite monthly variation.

Question 3

What index do Watsonville lenders typically use?

Accepted Answer

Most use SOFR or the one-year Treasury rate. The index determines how your rate moves after the fixed period ends. Ask for the margin and cap structure upfront.

Question 4

How much does a portfolio ARM cost versus a fixed-rate non-QM loan?

Accepted Answer

Initial rates run 0.50-1.00% lower than fixed non-QM loans. But over time, adjustments can erase that advantage. Compare total cost over your expected holding period.

Question 5

Do portfolio ARMs allow interest-only payments?

Accepted Answer

Some do for the initial fixed period. This helps borrowers with irregular income manage cash flow. After the interest-only period, payments adjust to include principal amortization.

Question 6

Can I refinance before the first adjustment?

Accepted Answer

Yes, most borrowers refinance during the fixed period if their income becomes easier to document or rates drop. No prepayment penalties on most portfolio ARMs.

Portfolio ARM Loans in Watsonville — Flexibility Beyond Agency Guidelines