An adjustable rate mortgage is exactly what the name implies; a home mortgage loan with an interest rate that gets adjusted during the life of the loan.

Adjustable rate mortgages gained popularity in the high interest loan market of the 1980’s. With rates as high as 16% quoted for even those with high credit scores, obtaining a mortgage loan with affordable monthly payments became difficult. At that time, ARM’s provided rates that began far below the market rates and home buyers planned to replace the adjustable with fixed rate loans when the economy improved. It was a great option for many buyers and worked extremely well. Those loans did adjust but the better lenders had tight caps on how much the interest rate could rise per year and often there was a two year period before a new loan adjusted at all.

Lenders usually associate two numbers with these loans. You may see 5:1, 1:1 or 3:2. The first number is the number of years the ARM will stay at the initial interest rate before reaching its first adjustment period. The second number is the length of time between adjustments after the first occurs.

A 5:1 indicates the original rate is guaranteed for the first five years of the loan. the 1 means the rate will be reviewed and perhaps adjusted yearly after that initial five year period.

The most common combination some years ago was 1:1 or 2:1. In recent years, the 5:1 option has attracted buyers and for some loans adjustments after the beginning rate time period may be made every 6 months. This second type carries much higher risk for the borrower over the long term. It was used primarily by those who planned to live in the home for only a few years. Unfortunately, the collapsing housing market resulted in a glut of homes for sale and some homeowners are facing huge increases in monthly payments because they are unable to sell their property.

Before choosing an adjustable rate mortgage, it is important to understand that they have both advantages and disadvantages and the choice of which type of mortgage is best for you will be largely determined by the current market as well as your own situation.

The advantage of ARM’s is the ability of the lender to offer a lower percentage and it may still be a good option for those who buy for the short term – but only if they live in an area not highly affected by the eroding market. As long as the buyer has the credit rating and ability to obtain a better mortgage if needed, it’s a useful buying tool. In a period of high rates, these loans are practical options.

The disadvantage is, of course, the risk involved for the home buyer. The success of the purchase depends on the financial market volatility, whether interest goes up or down, home valuation, etc. Those averse to risk are advised not to consider an adjustable rate mortgage under any conditions.

By: Trace Morgan

If you are looking to buy a mobile home and you have a limited amount of money to put down towards your purchase, you may want to consider a FHA mobile home loan. FHA stands for Federal Housing Administration and it’s responsible for Housing and Urban Development (also known as HUD). How does this help you? FHA insures your mortgage loan so that lenders will give you a good deal, even though you do not have a sizable down payment.

Under the FHA mobile home loan umbrella there are two types of programs. One is for people who already own land to put the mobile home on and the other is for people that choose to locate their mobile home in an established mobile home park.

When lenders consider applicants for FHA-backed mobile home loans, they must follow certain eligibility requirements. These requirements include considering the applicant’s credit rating, the income and the ability to repay the debt.

A Title 1 loan can be used to buy a mobile home, a lot on which to place a mobile home, or both. The home must be the primary residence of the person or persons obtaining the loan. There are maximum loan amounts as well as loan terms that must be adhered to, as follows. For a mobile home only, the maximum is $48,600. For a piece of land or lot, the maximum is $16,200, while the maximum for a combination of the two is $64,800. Maximum loan terms for FHA mobile home loans are: 20 years for a mobile home or a single section mobile home and lot, 15 years for a lot, and 25 years for a multi-section mobile home and lot.

Most of the time when you buy a mobile home, you will also have the opportunity to finance your purchase at the mobile home dealer in which you make your purchase. Sometimes these dealers will not offer FHA-backed loans. If they do not, ask them for a referral to a lender who will use FHA. Or you could consider finding a lender online.

To qualify for a FHA-backed mobile or manufactured home mortgage loan, you must meet some minimum criteria. You must be able to provider five percent down payment (although there are additional programs to help if you do not have this amount), proof of income and a suitable place to locate your mobile home (this may be on your own land or in a mobile home park).

By: Milt Wapner