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Adjustable-Rate Mortgages in Florida

If you hope to purchase a home in Florida and need mortgage financing, Dash Home Loans will find the smartest lending choice for you. For some borrowers, this means securing an adjustable-rate mortgage, otherwise known as an “ARM.”

Unlike fixed-rate mortgages, which have static interest rates throughout the lifetime of the loan, ARMs have variable rates. Though this unpredictability isn’t for everyone, it can help certain homeowners pay off their mortgages quickly. 

Ready to get started? Getting approved for an ARM in the Sunshine State is super fast with Dash!

Apply for an adjustable-rate mortgage

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Contents 

• What Is an Adjustable-Rate Mortgage?
• Understanding Florida Adjustable-Rate Mortgages
• Adjustable-Rate Mortgage Requirements for Florida Borrowers 
• Pros & Cons of Adjustable-Rate Mortgages
• ARM vs Fixed-Rate Mortgage: Which Is Right for You?
• Work With Dash To Secure an ARM Loan in Florida
• Florida Adjustable-Rate Mortgage FAQs

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What Is an Adjustable-Rate Mortgage? 

Most prospective homeowners know all about interest. But, if you’re completely new to the real estate world, interest is the cost of borrowing money. It’s expressed as an annual percentage rate (APR) and typically changes based on market conditions. It’s also influenced by factors in your control, like your credit score and home price.  

With a fixed-rate mortgage, the interest stays the same until you pay off the loan. But with an ARM, the interest rate changes. 

At first, you’ll benefit from a “teaser” rate that’s delectably low. But after the teaser rate period ends, your APR will adjust on a yearly or even monthly basis.  

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Understanding Florida Adjustable-Rate Mortgages

Now, we’re going to dig deeper into ARMs. If these details get too confusing, feel free to reach out. We’ll pair you up with a Mortgage Coach who can break things down into simpler terms. 

Normally, homeowners get the hang of things once they understand these concepts:

• Index: An index is a benchmark interest rate that reflects general market conditions. This rate varies. 
• Margin: The ARM margin is the number of percentage points added to the index after the initial rate period ends. The margin is determined in your loan agreement.  
• Initial and Periodic Caps: The initial adjustment cap determines how much your interest rate can rise or fall the first time it adjusts. This protects the lender and borrower from super high or low APRs. Periodic caps safeguard homeowners by dictating how much the interest rate can change during an adjustment interval.   
• Lifetime Cap: The lifetime cap is the maximum interest rate a borrower can expect to ever pay.

ARMs are expressed using two numbers. 

The first number is the length of your initial teaser rate period. 

The second number is how often the rate will adjust after the fixed-rate period.

With a 5/6 ARM, for instance, you’d benefit from a fixed rate for five years followed by a variable rate that adjusts every six months.    

Most ARMs also have an adjustment cap. This limits how much the interest rate can change at each adjustment period. 

For instance, a 5/1 ARM with a 2/2/5 cap structure means your rate won’t change for the first five years. But during the sixth year, your rate can increase by a maximum of 2% (the first “2”). In the following years, your rate can increase by a maximum of 2%, as noted by the second number. However, your APR can never increase by more than 5% (the last number).

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Adjustable-Rate Mortgage Requirements for Florida Borrowers  

We know what you’re thinking: “Lower interest rates to start? That’s the mortgage option for me!” 

But before you sign on the dotted line, you must make sure you’re eligible. Though financing requirements vary from lender to lender, Florida borrowers must generally have:

• A credit score of 620 or higher. Borrowers with less-than-awesome credit (think: as low as 500) may still qualify for an ARM. Just make sure to double-check your lender’s credit requirements.  
• A down payment of at least 5%. In some instances, borrowers can put as little as 3.5% down. However, if you put less than 20% down, you’ll be expected to pay private mortgage insurance. 
• A debt-to-income ratio under 45%. To determine your debt-to-income ratio, add up your monthly debt payments and divide them by your gross monthly income.

Do these requirements make you feel jittery and nervous? If so, take a deep breath and reach out. We’ll connect you with a Mortgage Coach who can walk you through the prequalification¹ process step-by-step.  

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Pros & Cons of Adjustable-Rate Mortgages

Let’s start with the positives. 

ARMs allow Florida homeowners to save money, at least at first. Since the APR is lower during the initial rate period, homeowners benefit from a lower mortgage payment. 

Depending on your financial goals, you can take that extra money each month and put it toward a higher-yielding investment. 

Savvy borrowers also use ARMs to purchase starter homes or fixer-uppers. Why? Because if a homeowner buys a beachside bungalow using a 7/6 ARM, they have seven years to remodel while paying a lower APR. Before the interest rate adjusts, they can sell the home and never worry about higher rates. 

Of course, ARMs have serious disadvantages too. 

Namely, rates and payments can rise significantly during the lifetime of a loan. If your budget isn’t prepared for these shocks, you could risk foreclosure. Unpredictability aside, many homeowners steer clear of ARMs because they are more complicated than a traditional, 30-year fixed mortgage. 

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Work With Dash To Secure an ARM Loan in Florida

Getting a home loan in Florida is normally like listening to nails on a chalkboard — downright horrible. But when you work with Dash Home Loans, Florida’s friendliest and most efficient mortgage lender, securing an ARM is quick and easy. Sounds good, right?
At Dash, we’ve streamlined the lending process by firing inefficient loan processors and nixing superfluous paperwork. We also set ourselves apart from big banks and credit unions by offering five-star customer service. Don’t believe us? Check out our reviews.

Apply now

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