Adjustable-Rate Mortgages Overview
Effective January 1, 2015, we will no longer purchase ARMs with lookback periods of less than 45 days. Review Single-Family Seller/Servicer Guide Bulletin 2014-12 for more information, including the October 20, 2014, cutoff date in the selling system.
More lenders and borrowers are seeking out the advantages of adjustable-rate mortgages. In many market conditions, ARM rates are often 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 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 Guide Chapter L33 of the Single/Family Seller/Service Guide (Guide).
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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 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.
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