• Single-Family
  • Making Home Affordable Program
  • Underwrite and Process Loans
  • Sell and Deliver Loans
  • Mortgage Products
    • List of Products
    • Home Possible Mortgages
    • Product Training and Education
  • Service Loans
  • Doing SF Business with Freddie Mac
  • Forms and the Guide
  • The Learning Center
• Multifamily
• Debt Securities
• Mortgage Securities
• Vendors and Suppliers

Adjustable-Rate Mortgages Overview

More lenders and borrowers are seeking out the advantages of adjustable-rate mortgages. In many market conditions, ARM rates are in many cases lower than fixed-rate mortgages, and for certain borrowers, ARM advantages more closely meet their needs.

ARMs are best suited for borrowers who:

• Understand that their rate may increase after the initial period.
• Don't anticipate holding on to the property for the full term of the mortgage.
• Expect their income to increase in the next couple of years.
• Want the benefit of a lower initial rate and monthly payment.

With dozens of Freddie Mac ARM products, you can increase your origination potential by offering a dynamic and flexible ARM product. Starting with 3/1, 5/1, 7/1 and 10/1 ARMs, a line of LIBOR-indexed ARMs with 6-month adjustment periods and expanding into many varieties of specialty mortgage products, including Initial Interest and Home Possible Mortgages, our ARM offerings leverage more home financing flexibility. Use ARMs for single-family homes, condominiums, second homes, manufactured homes, and for 1- to 4-unit primary residences or investment properties.

For super conforming adjustable-rate mortgages, see our detailed requirements in Chapter L33 of the Single/Family Seller/Service Guide (Guide).

Product Features

Feature	Requirements
Property Type	1- to 4-unit primary residences, including condos, PUDs and manufactured homes. Second homes 1- to 4-unit investment properties
Transaction Type	Purchase No cash-out refinance Cash-out refinance Streamlined refinance
Maximum LTV Ratios (without secondary financing)	Maximum LTV ratios must comply with Guide Chapter 23.4.1
Down Payment or Closing Costs	Secondary financing Shared equity plans Temporary subsidy buydowns
Eligibility/Underwriting	Loan Prospector® Non-Loan Prospector Loan Prospector Caution Mortgages and Non Loan Prospector mortgages must be manually underwritten per Guide Chapter 37. Minimum Indicator Score of 620 unless otherwise specified in the Guide (Loan Prospector® A-minus mortgages are exempt). Maximum debt-to-income ratio of 45 percent for manually underwritten mortgages except Streamlined Refinance Mortgages. All mortgages must meet the risk class and/or minimum Indicator Score requirements in Guide Exhibit 25A Originate with most Freddie Mac mortgage products, including Home Possible Mortgages (5/1, 7/1 and 10/1 ARMs), a full line of Initial Interest ARMs,  Financed Permanent Buydown Mortgage and more. Reference Guide Section 30.16 for more information.
Execution Options	WAC ARM Cash WAC ARM Guarantor
Delivery Fees	An ARM postsettlement delivery fee applies, in addition to other fees that may apply based on the individual characteristics of the mortgage. See Guide Exhibit 19 for details on applicable fees.
Special Delivery Requirements	You must deliver all mortgage data required by Form 13SF including Mandatory SCC codes, Indicator Score, Index Source Code, Index Lookback Days, First Rate Adjustment Minimum Rate and First Rate Adjustment Maximum Rate.

Lender Benefits

Adjustable-rate mortgages help you:

• Offer an alternative to conventional fixed-rate mortgages, and can be combined with many options to increase your origination volume in any market condition.
• Provide your borrowers with a greater level of individual flexibility with Initial Interest ARMs, or when cross-marketing an ARM with many other Freddie Mac specialty mortgage products.

Benefits for Your Borrowers

Adjustable-rate mortgages help your borrowers:

• Maximize their home buying power when interest rates are lower than typical fixed-rate mortgages.
• Obtain flexible home financing that matches individual needs, particularly borrowers who frequently relocate, or intend to move up before the end of the fixed-rate term.
• Choose from a variety of home financing options, for a variety of property types, to meet their individual financial circumstances.

For More Information

• Call your Freddie Mac representative.
• Review our complete ARM product line.

Training Opportunities

Visit The Learning Center for live and recorded web conferences, access to classroom-style workshops and self-study tools – all designed to help you stay competitive, serve more borrowers and make it easier to do business with us.