Question 1

What happens to my ARM payment when rates adjust?

Accepted Answer

Your rate moves based on your index plus margin, subject to caps. A 2/2/5 cap structure limits increases to 2% at first adjustment, 2% per subsequent adjustment, and 5% lifetime.

Question 2

Can I refinance my ARM before it adjusts?

Accepted Answer

Yes, most Patterson borrowers refinance during the fixed period. No prepayment penalties exist on agency ARMs, making early refinancing straightforward when rates favor it.

Question 3

Do ARMs require higher credit scores than fixed-rate mortgages?

Accepted Answer

No, minimum credit requirements match fixed-rate loans at 620 for conventional products. Pricing improves significantly above 700 due to lower perceived risk on adjustable products.

Question 4

How much can my payment increase after the fixed period ends?

Accepted Answer

Initial adjustment caps typically limit increases to 2% above your start rate. On a $400,000 loan starting at 6%, this means roughly $470 more monthly at first adjustment.

Question 5

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

Accepted Answer

7/1 products cost only slightly more but provide two extra years of payment certainty. This matters in Patterson where housing appreciation may lag refinance opportunities.

Adjustable Rate Mortgages in Patterson: Lower Starts, Strategic Timing